2008 Year In Review

If you believe everything you hear in the media, 2008 was a horrible year in the real estate world. Lenders are folding up their tents, values are falling to almost zero, inventory levels are off the charts. You'd think that wolves are roaming the barren landscape, devouring the carcasses of the few people brave and crazy enough to even think about buying or selling a home. To borrow and paraphrase a line from the late, great Richard Pryor (one of the few that I can actually use in mixed company), "Who are you gonna believe, them or your lying eyes?". So put down the newspaper, turn off the cable news, and let's see what's really been happening in the Lompoc Valley real estate market over the past year.

2008 was a huge opportunity year in our market, and buyers came out in big numbers to take advantage of it. We had a total of 390 residential units sold in the Lompoc Valley, up a whopping 53% from 2007. This increase was driven by approximately a 25% decrease in home values over the course of the year. The exact numbers may change a small amount as the last few 2008 sales get updated in our MLS, and later this month I'll post a chart showing price trends over the past few years.

The number of residential listings that came on the market dropped off last year by about 11%, and the vast majority of the listings that came on were either REO's (43.3%) or short sales (24.5%). Those that were neither, your traditional "mom & pop" sellers, had to compete with these listings, or languish on the market. REO's in particular tended to be aggressively priced for a quick sale, thus the big decrease in values last year. And they got just that. The median days on market for all sold listings last year was 39, down about 28% from 2007.

So what's been selling? No big surprise - REO listings made up 59% of the listings sold last year. I can't easily track the 2007 numbers because we didn't have a field for that in our MLS until early 2008, but looking back at some manual tracking that I did on this in late 2007, it looks like REO's were about 30-40% of the sales late in the year, and probably less than that in the first part of the year. Short sales accounted for 7.4% of the sold units. We started seeing a trend last year of improved success in short sales, but they still are presenting a huge challenge, and they require a sharp and tenacious listing agent and a very patient buyer to get closed.

We saw a huge change in how people were paying for home purchases in 2008. For a few years, FHA and VA loans were a very marginal, almost unheard of part of the market. But last year, that all changed. A combination of lower prices and tighter lending practices on conventional loans started moving the loan market to these government loans. These factors combined to increase the median escrow periods to 42 days, up 31% from 2007.

So where does this leave us? What's next? Let me tell you this much - anybody who tells you that they know where this market is going is either lying or deluded. Come back next week, and I'll make my best stab at prognostication for 2009, and we can all look back on it and laugh this time next year. Or maybe I'll look like a genius. We'll see...