Artur has opinions - be it on ongoing real estate evolution or why history and its lesson are important. He speaks up on local real estate market (San Francisco Peninsula) as well as on social and political events and processes impacting us all.

Wednesday, January 24, 2007

Are Sacramento County and Central Valley, CA a real estate disaster area?

How long will it take for Sacramento County and Central Valley markets to recover? After many years of a real estate Eldorado - the markets over there hit a slump. Many investors doubled their money in 2 years: a new 5 bedroom, 3 bathrooms homes increased in value from $300k-$400k in 2003 to $600k - $700k in 2005. But for investors, who have not sold a prolonged market slump is in store (according to some opinions it will take 2 to 3 years for prices to level off and 6 to 7 before they will start moving up again). A 3 year old house, which could sell for $650 k a year and half ago might sell for $550k - $575k today and only if it is in perfect condition as they have to compete against new homes still being built. 2 years from now its value might be below $500k.

I am a San Francisco (SF) Peninsula broker and I helped some of my SF Bay Area clients to buy and sell properties in Elk Grove (Sacramento County). However, some of them are facing a difficult decision.

What would you do if you were an investor in this situation? Should investors hold on to their properties and wait through the slump or sell a soon as possible? Selling is not easy too. If you drive by the area you will find 4 to 5 “For Sale” signs on a single block in newly built communities. Average time on the market there is 90-120 days. But waiting out might be difficult or impossible for many investors as prices of rentals have gone down. You will have a negative cash flow even if you have 30 - 40% of equity and are paying a minimum payment on the 1% Option ARM loan (many investors got 100% financing and after 2 years combined loans to a single Option ARM loan). Of course, one solution does not apply to everyone, but what would you do or what would you advice your customer who found himself/herself in this predicament?

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Subscribe to ARTUR'S ATTITUDES posted by Artur Urbanski @ 11:02 PM 


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