• Foreclosures Banks are still holding inventory and delaying completing the foreclosure process to take properties back (even though they are not getting paid).  There are about 60 million mortgages in the US and about 10% of them are delinquent.  The banks are sitting on about a years supply of inventory and defaults continue to grow at a rate of about 300,000 per month nationally. They are expected to start releasing them early 2010.  We will see. 
• Government interaction to this point has been extremely helpful in preventing an even more dramatic decline in prices.  Demand needs to continue to be stimulated.  Without continued government interaction house prices will decline and the overall economy will suffer greatly.  The current government goals are to push for workouts - this includes short sales and loan modifications.  The first round of this was very unsuccesful. 
• Short sales (when a seller owes more than the property is worth and the lender must accept a sale to be completed) - are going to be processed faster and better.  New California law that goes into effect in April will require this.  In addition banks are realizing the financial benefits to completing a short sale. 
• Inventory The low inventory is creating false optimism in the market conditions. It has created a 5 month sellers market.  Time will only tell if this carries into the new year.
• FHA loans - are the primary source of loans.  They are typically 3-1/2% down but have a large amount of additional closing costs. They are going to tighten up guidelines for next year.  The private industry will have to pick up the slack or we will see another lending crisis all over again. 
• Interest rates - hover at the lows of the last 40 years.  Rates must stay low to stabilize housing.  If mortgage rates rise in this environment it will put downward pressure on prices quickly.    
• Great values - Incredible deals for those who can pay all cash.
• State of the economy will only improve when real estate stabilizes.
• Affordability The bottom priced homes moved up very fast from their lows of 6 months ago.  It is hard if not impossible now to find any property under $300,000.  Individuals or couples can buy a home with good credit, about $20,000+ in the bank and a combined salary in the range of $75,000 to $80,000.  

The Urban Perspective... 

American Planning Association names Echo Park one of top ten neighborhoods in the country.

I recently heard someone describe their search for a house as, "looking for an oasis in an industrial wasteland".   Somehow the wasteland came across as desirable.   What is it about the urban grunge that attracts people?  The grunge is not necessarily the desirable state but simply a bi-product of the diversity and density within the city streets.  I believe that for now, it has become an acceptable bi-product because it is rooted in a psychosocial comfort zone. Much of the decayed man-made urban artifices tend to evoke the feeling of stripping our everyday environment down into its essential elements, and thus allowing for a freedom to feel artistic inspiration, as well as being unencumbered by all of the modern fluffy barriers that isolate people from each other in suburbia.   It somehow translates to a focus on what is inside rather than on the surface.  If things around us are real then we can be ourselves.

     The suburban ideal of living where the air is fresh and the schools are better doesnt dominate buyer patterns anymore.  Two main reasons are that, Americans are marrying later and delaying parenthood.  Now, even when children arrive many are settling in for the long term and raising their small families in the urban areas.  And even though people are not commonly leaving for the better schools in the suburbs, local urban school enrollment is still down over 50% in our neighborhood.

     Statistics show that the people moving into urban life are educated, sophisticated young professionals typically between the ages of 25 to 45.    Historically in market downturns the areas most affected are near city centers but this time around the fringes are taking a harder beating.  The desire to live in urban LA is still strongly prevalent.