Today’s Los Angeles Times includes this story on potential homebuyers waiting on the sidelines to see how far prices will drop.
No one knows how severe the slump will be, but economists and real estate experts interviewed by The Times, and who were willing to make predictions, said prices could fall 15% to 25% before turning back up. Most said values would continue falling through at least next year, and some thought the market wouldn’t reverse course until 2010.
But some experts added that outlying areas, such as Riverside County, would suffer greater price drops than more affluent areas.
Areas such as the Central Valley and the Inland Empire will be the hardest hit, [UC Berkeley professor Kenneth Rosen] said, because these attracted a higher percentage of new buyers with shaky credit, and many of them are now defaulting on their loans. He believes values in these communities could fall by 15%. But “in areas where there is very little new housing, where it’s hard to build and a lot of wealthy people live, there will be little decline or maybe none at all.”
Not everyone agrees.
[O]thers call this wishful thinking, saying low prices eventually work their way to even the most affluent areas. “Every place takes the hit in the long run,” said Christopher Thornberg of Beacon Economics, a consulting firm in L.A.
Who’s right? Only time will tell.