Real Estate Article: Recent Decline in the Market
06/15/2004
Over the years, the increase of estate market demand has grown in a rather vertical trend. Today, however, has made a turn in the market, indicating a freeze in the market. In areas such as Chino Hills and Diamond Bar, the estate market has shown a drastic decline. Most of the high priced houses on the market have run into a frozen stage. According to most of the citizens in California, the current values of estates are not even close to affordable. The prices have yet to stop increasing.
Although the prices were high, there was still a great demand in the market. So why has the month of May brought a change in forecast in the estate market? During the month of March, I posted an article “If the bank appraisal is low should I still buy the house?” As I have mentioned, although the increase of prices in the past has been beyond our imagination, the market cycle still has its rules. However, this year’s market increase has been unpredictable. From 1998, the estate market began its skyrocketing journey. The number of Chino Hills’ estates on the market ranges between 100-150. Each month, roughly about 70-110 estates in Chino Hills successfully go through transaction. On the other hand, Diamond Bar has around 80-120 estates on market each month with 50-90 going through transactions. Estates usually remain on the market lasting for about 1 and half to 2 months. Cities such as Walnut and Rowland Heights were also a hot market in the real estate. Until the end of 2003, the trend of market slowly climbed down because although demands dropped, prices increased. Many sellers had to sacrifice their opportunities to sell, therefore estates on market slowly dropped as well. During this March and April, it was evident that the market made a drastic turn when only 50 estates were on the market of Chino Hills. This sort of transformation threatened and forced buyers to pay for prices higher than ever. Within a short two months, prices rose from $440,000-$510,000 proving the surprising changes in 2004 as I have mentioned before.
This sort of ramification caused many inexperienced sellers to put their houses on the market. For example, many sellers who have owned their houses for only about a year, and sold their house making profits, but forgetting that they will be taxed. Even so, seeing the $100,000 profit, they chose to disregard the tax and continued the process of selling; however, after selling the house, they haven’t a clue for where to move to. Just a little over a month, beginning May until today, many sellers decided last minute to put their estates on the market. The current number of Chino Hills houses on the market stand to be 210, breaking the record of estate market history. This put all the buyers in power of the market. They realize that the prices of the market will soon eventually drop significantly. Well, not long ago in the month of May, records have shown only 69 houses successfully sold. I believe by June, the decline will continue, causing sellers to have a more conservative attitude. My estimation is that only 50 estates in June will go through successful transactions.
If my estimations of the actual market trend is close, it will cause many nervous sellers to quickly put their estates on the market. Chino Hills may have 250-300 houses on the market, and Diamond Bar may have 220-280, with only about 50 sold. The probability of the houses being sold will probably be as low as 16-20%, meaning of every 5, 6 houses, only about 1 will close its case. Perhaps many buyers anticipate the housing market will collapse as the prices drop drastically. My belief is that California’s economy is very strong. The number of immigrants in California is constantly increasing thus the demand for housing is very high. With such a high demand for housing it is very unlikely that prices will drastically drop down. I believe that it is because prices rose at a ridiculous rate earlier this year and that the prices are just returning back to normal. When prices are somewhere along the lines of prices during the beginning of this year, it will revert back to increasing steadily or decreasing steadily. At this time the sellers who were only making rash decisions for a quick and easy profit will take their homes off the market and the buyers will stop waiting for prices to continue dropping.
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