Douple Dip?

Double Dip means that real estate values, which have been going down since about 2006, may have another hit coming in the next couple of years.

Now as we all know, supply and demand determine value. So these 2 factors will determine future rises and falls in home prices. Supply and demand vary considerably as you travel around the Bay Area, and throughout California. The likelihood of a declining real estate market in the less desirable areas of California is very real! Lets focus here, on just Marin County.

The Supply Side:

Some areas of Marin experienced little to no new construction in the last decade. With a limited supply of homes, these markets have an advantage. Northern San Rafael, and Novato had a significant amount of new homes built in the last 10 years, and have also seen the most significant declines. Don't believe the press when you hear that foreclosures are slowing down. There are dozens of filings in Marin County every month, in all price ranges.

There are likely hundreds of additional homeowners that have stopped making their mortgage payment and have not been filed upon by their lender, even though they are 6+ months delinquent.

The government, and super rich investors now own controlling interests in many of the banks and mortgage servicing companies. They can regulate when to foreclose on homeowners, when to approve short sales, and when to release foreclosed homes out on the market to be sold. They have an interest in controlling the supply of new listings.

In the last 10 years, the vast majority of houses and condos in San Rafael and Novato were purchased with 20% down or less. Most of these properties have gone down in value 20% or more. If you purchased a home for $600,000 with a loan of $540,000, and it's now worth $500,000, what are the chances that this might not work out in the future?

The Demand Side:

The real estate boom of the late '80's took place while interest rates hovered around 8%-- higher than they are today. So rates don't have near the impact on a rally as employment and consumer confidence. When a higher percentage of prospective home buyers feel more confident that their high paying jobs are safe, that is when demand will increase, and inventory can decrease, resulting in higher home prices.

Consumer confidence and higher employment rates are the keys to turning this around for good.

The price of many million dollar homes in San Rafael and Novato have come down 30%. There is some pretty good evidence that parts of Novato have already gone down 10% this year. The cause is limited demand. Even Sausalito, which has nearly a one-year supply of homes for sale over $1,000,000, is likely to have another round of equity loss.

The conclusion:

Marin County has done better than most of California, but for the next couple of years is still at risk for more equity loss in some areas.