For anyone who knows me really well, you know I can get obsessed with houses. Actually, I've been obsessed with houses since I was 5 years old. My parents looked for a house for quite a while before they decided to buy one, and I was dragged to lots of these "open houses." After they finally purchased a house, I developed a fixation on beautiful big homes and looking at them in the "home magazines" you see neatly displayed on your way out of the grocery stores. I would pick up these magazines all the time! I admit, I still do. It's a compulsion. In kindergarten and first grade (yes, that young!) I would cut out pictures of "dream homes." I still have some of my cut-outs from back then. These cut-outs were of huge homes in Blackhawk, California that were going for a mere 400-500k, priced now for 2-4 million dollars.
I've been keeping my eye closely on the housing market for the past few years fairly diligently up until the last few months. I have always joked (well, seriously wanted to believe) that when Chris and I decide to buy, prices will be at their lowest. The ongoing talk over the last few years is that many people cannot really afford the places they buy. They put zero money down or very little down and take these ARM or I/O jumbo loans that are going to reset in 2-5 years thinking that housing only goes up and they will be able to sell for a profit. Many people were able to take advantage of the rising prices and happened to sell at the "right" time. Unfortunately, no one can really time the market well enough to know exactly when and where the "right" time starts and ends. Many people who bought property within the last 1-4 years are seeing that their property is now worth much less than they purchased it for.
I spent a bit of time today looking through the MLS and other real estate listing sites, and honestly, I was shocked. Prices are dropping much faster and lower than I thought they would. In many areas it looks like we are quickly reaching 2003 prices and in some areas, prices from the 1990's! The less than desirable areas are the first to drop, and have the most dramatic decline (for obvious reasons). In Richmond (not so desirable place to live), 10% of the single family homes for sale are between 100-200k, and 30% of the single family homes are under 300k. In places like Concord, San Jose, and many others around the Bay Area I was able to find many more homes under 300k. For those who might be unfamiliar with Bay Area prices, homes under 400k in many areas were virtually unheard of just 3 years ago (let alone below 300k)! I randomly looked up the sales history of several homes that are currently for sale in Petaluma and nearby towns. Many of these people bought within the last couple years and are willing to take a huge loss! Of just the few I saw, most are willing to take a 100-200k loss! (e.g. They bought for 650k in 2006 and are selling for 450k now.) It looks as though many people are panicking--either that, or banks are starting to panic with the foreclosed homes they need to sell.
For those who can buy, and more importantly actually qualify for a legit loan (banks are getting stricter I believe) this is a great time to buy in the area. I think prices in the more desirable areas will come down a bit more before prices start leveling off, but if you can put down a good-size down payment and are in it for the long term, why not buy now?