By Martin Brower
The flow of information regarding the current housing market,some informed, some not,by reporters, columnists, letter writers and op-ed contributors, continues to confuse the public.
Most of the information generated seems to be from young people who have not witnessed previous market fluctuations.
It is important to understand the background of the housing market in Orange County.
In the early and mid-1970s, the market was sluggish like it is now,and shot up in the late 1970s. In the early and mid-1980s, the market once again became sluggish,then surged in the late 1980s.
Then came the early and mid-1990s when the market was really slow. But in the late 1990s, the market escalated again.
Keeping this pattern in mind, the housing market should have cooled in the early and mid-2000s.
But extremely low interest rates and innovative mortgages not only kept the market vitality going, it superheated the market as investors were swept into the rising tide.
Now, the market once again is cooling off as should have been expected because it had each previous decade.
How long will the cooling off period last?
In the previous three decades, the sluggishness (or actually the normalcy) lasted for four to five years. Will the 2000s be any different? History would tell us not.
How far will prices fall?
It depends from which high point one measures. At the height of the recent “excitement” as I call it, a typical 35-year-old, 2,400-square-foot tract home in the Harbor View Hills South section of Newport Beach would have sold in a week for $1.7 million.
If you had to sell today, that home should be listed at $1.5 million and probably would sit on the market for a month or more before selling for perhaps $1.4 million.
That is a drop of 18% from the wild peak. If the homeowner has to sell, and the home does not move until perhaps 2009, it might go for $1.2 million,a nearly 30% drop.
On the bright side, each time the market has dipped, it has subsequently risen to a higher level than the previous high.
After all, the Harbor View Hills South home cited above sold new in 1970 for $60,000. And as I tell my audiences when I speak on OC real estate, some day your children will tell your grandchildren “I could have bought homes all over this area in the 2000s for $2 million.”
And your grandchildren will ask, “Why in the world didn’t you buy a lot of them at that price?”
Brower was director of public relations for The Irvine Company from 1973 through 1985, then edited real estate newsletter Orange County Report from 1985 through 1999. He currently writes a column called Along the Coast for Coast Magazine.
