Gonella Realty's Market Update

On Saturday, July 17, 2010, Loren Gonella spoke before the Military Officers Association of America, Yosemite Chapter in Merced, CA.  Loren spoke about what created the massive increase in housing prices and the over-building that occurred during the real estate boom, as well as where the  real estate market is today, and the future of real estate.

3 things led up to the real estate boom:

1)      Speculative fervor due to the coming of UC Merced

2)      Many out of town builders coming into the area (due to the speculative fervor due to the coming of UC Merced) and then paying too much for land

3)      Cheap credit led to no-documentation-stated-income loans—a person would walk into a lending office and say “I earn $20,000 per month” and the income would never get verified—the lender would just take the person’s word.

These factors contributed to a speculative fervor that caused prices to increase by 25-35% per year in 2003, 2004, 2005.

The market peaked in the 3^rd quarter of 2005 at a median sale price of $350,000.  Home values started to fall in 2006 and have dropped almost 70% since the peak.  Today, home values are starting to increase—home values are up from June 2009-June 2010 with an increase of 14%.

We believe that values have bottomed out and will continue to increase.  In fact, there are more buyers than sellers, which have created an inventory shortage.

So where is the real estate market going from here?

We believe that the market is starting to transition from short sales and foreclosures to more traditional sellers.  Also, new home construction is starting to make a comeback, in part due to the fact that the City of Merced is working on reducing new construction fees.

To summarize, we told the Military Officers Association of America, Yosemite Chapter that the market has appeared to bottom out, prices are increasing, and homes are selling!