Of course very few people could have predicted that the dire real estate woes would drag the entire economy to the brink of collapse and we were no better than most.
However, for your enjoyment weâ€™ve clipped a segment out of our 2008 market forecast made on January 4th 2008â€”and highlighted some of our more interesting comments:
â€œThis is precisely why the Peninsula should fare better than other areas [in 2008]â€.
â€œHowever, itâ€™s entirely possible we are on a precipice which could collapse at any time. What is [currently] impacting the Peninsula is the rising cost of energyâ€”especially gasoline.â€
â€œWhat could have an incalculable impact would be a prolonged recession and loss of local jobs; either of these would undoubtedly bring a decrease in home values to the Peninsulaâ€.
In 2008, Investors eventually began to snap up undervalued properties in the central valley and a few of the nine bay area counties which were hard hit by foreclosures. This had the desired effect of liquidating the tidal wave of inventory but the undesirable effect of sinking the reported median price by skewing the sales mix to smaller homes (since smaller homes and distressed properties sell for less). The media meanwhile continued its relentless reporting of the falling median home price without appreciable application of responsible journalism. Bombarded by the mediaâ€™s lack of analysis, invariably many buyers were frightened by the reports of falling home values and quite reasonably and expectedly took a â€œwait and seeâ€ attitude. Thatâ€™s not to say the mediaâ€™s information was wrong, but they do choose what to report and what to leave out and in many cases they reported numbers without the necessary perspective leading many to believe the housing situation to be far worse than it was in some areas, and far better than it was in others.
Although clearly there were several other factors which inhibited the ability of people to purchase homesâ€”not the least of which was tighter lending standards and higher interest ratesâ€”our intrinsic evidence suggests that most credit worthy buyers on the Peninsula withheld from purchasing a home based on the fear of values spiraling down, not because they wanted to wait and â€œtime the absolute market bottomâ€ or couldn't get a loan.