“Green Shoots,” the purported early signs of economic recovery are everywhere. Or are they?

This is the fundamental question gripping the US economy right now: Are the worst of our financial woes behind us, having emerged on the other side of the worst recession since World War II, or are we merely in the eye of the storm, strong winds and chaos just around the corner … again?

As usual, the residential housing market is in the crosshairs of the ongoing battle between the bulls and the bears.

On the one hand, sales are up (in the hardest hit areas), prices appear to be stabilizing (using median price as a proxy for sales throughout California) and interest rates remain at near record lows (as long as the US government continues to flood the market with cheap money). On the other hand, high end markets remain stagnant (since Jumbo mortgages are nigh impossible to get), a flood of fresh bank owned inventory looms (as foreclosure moratoria expire) and prices are at lows not seen since the early part of the decade (weren’t prices out of reach for most families in California back then too?).

There are 2 crucial trends we are monitoring here at Cirios Real Estate, both of which are playing out in real time as the summer buying season heats up. First, with foreclosure moratoria expired, banks are gearing up to unleash a 6 month backlog of bank owned homes onto the market. And while the pop in supply will be predominantly felt in lower end markets, high end markets will not be immune from these distressed sales. The ultimate question is whether strong buyer demand — driven by lower prices and attractive interest rates — can sop up the supply without driving prices down even further.

Second, recent data released by the Mortgage Bankers Association highlights a trend first mentioned here at Cirios over a year ago, when it was but a nascent blip in an already ugly smattering of mortgage default data. Prime loans, those given out to only the highest quality borrowers, are now defaulting at a record pace. Coupled with mounting job losses and tight consumer credit conditions, higher end real estate markets are poised to continue their free fall.

All this adds up to a buying environment where certain buyers will find fantastic bargains, while others buy directly into the latest tsunami of price declines. Prefer to be grouped as part of the former? Let Cirios be your guide to navigate the choppy seas, contact us at 415.217.0012 or info@ciriosre.com

This entry was posted on Tuesday, June 2nd, 2009 at 12:02 pm and is filed under Cirios Trends. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.