I see this as nothing more than a seasonal blip nurtured by govt. programs. School's started now, traditionally sales slow then in normal times, plus the shadow invenntory HAS to start hitting market soon further depressing prices.

Nothing more than a blip.

My realtor has been telling me about the "shadow" inventory for months and months.  By now there should have been two waves of REO sales since Spring. None came. Now he's lamenting that there's nothing for sale on the market (this is easy to see from the Redfin listings). 

I know that many folks are still believeing and hoping that prices will go down, and none of us can foresee future developments. However, everone who thinks that lots of inventory MUST appear in the future because this always happened in the past should consider that the "rules of the game" might have changed.

The only time amateurs can beat professionals is when there is upheaval, so that all of the knowledge the professionals have accumulated does not apply anymore.  That was the case last Fall. Real estate melt down and potential bank crashes. Hence, fire sale of properties early this year as banks didn't know how to respond otherwise.  Since then, the banks have learned how to deal with the new situation. It is cheaper to keep people in their house, even if they temprarily do not pay for 6-12 month, due to short term problems.  No property write-off, comps remain high, owners will be very greatful, government supports it. Win-win-win! Of course there are some that can't be helped (the toxic ones) who are too deep under, but much of the rest might be worked out over time. If not, then slow sell-down at higher prices. And even if there were a next wave, I would assume banks would sell to REITs or similar wholesale investors. Why bother with retail. At any rate, banks are becoming so profitable again (read Google news on Wells Fargo and BoA planning to pay back many Billions of TARP money early) that they are not under great pressure to offload inventory at bargain prices.  It's a new game and banks have learned it quickly.That's my view. No need for anyone else to believe it. 

I just hope that my second shortsale purchase here in OC finally comes through, so that I do not have to start searching again in this largely empty (bank) sellers' market. Oh yes, and I am buying bank stocks again. 

"Oh yes, and I am buying bank stocks again. "

You are about 6 months late on your stock purchase.

I don't know about bank stocks. But I have been thinking that a lot of money has been pumped into this economy and it's sitting in cash and there is a good chance that all that cash is going to find it's way into the stock market. I must say that if I had a lot of cash sitting around (I think the banks are flush with money that they are hording and supposed to be lending) I would be it in stocks long before I would consider real estate. But I am both an amateur at real estate and stocks so who knows for sure.

Paul

@Homebuyer2oo9

You are right (maybe even 9 months). Actually I bought some in March and some in July.  Just like many folks on this board hesitant to buy real estate, I was hesitant to buy bank stocks earlier. So I missed out on the real lows, but still should have some upside potential. (Still some blood on the street.)

Thanks for the reminder.

treval,  

Patience pays given the facts below maybe you can just sit back and relax as you are in no danger of missing opportunity even if you are not trying to hit the bottom. There are lots of reasons behind the lack of inventory but I certainly would hope that you don't simply take the absence of current inventory to be your sole basis of proof of a recovery.  Perhaps one of two of the following stats will provide some additional insight and encourage caution on your part.  I find that yes myself and others are quite bearish on orange county real estate but if you are putting your good money on the table consider both sides of the equation and reach beyond your realtor for information.  Maybe even spend a small amount of money like I do to keep yourself informed through one of the foreclosure tracking websites.  I think you'd be shocked if you saw a visual representation of the homes in foreclosure proceedings in your own area of orange county.

Some facts as requested. 

2508 NTS in Orange County for month of July

3074 NOD   "                    "

Yesterday's auctions on the courthouse steps

Total 429 auctions  -- remember this is 1 single day

9 actually sold to someone

22 went back to the bank

34 were canceled (?)

364 were kicked down the road to another day.

Current homes under some sort of foreclosure actions in the OC 

19164 (1.8% and rising)  It doesn't take much to continue to depress prices, maybe one or two distressed property sales in a neighborhood will continue the trend.   

Total households 1,035,491

Cure rates on defaulted mortgages

Prime 6.6%

Alt A   4.3%

Subprime 5%

I'll let you draw the parallel and decide for yourself what ~18200 homes hitting the market in some distressed format will do to prices.  I think your comment regarding a 50% decline is just about spot on personally.  (put another way ~2001)

Now I'll go back to generalizations and state that nothing that goes as extremely out of whack as the real estate bubble in Orange County simply drifts back to trend line.  Bubbles almost by definition pop and deflate well below trend line.  Now assuming you have the cash flow to float the property already bought and have a looong time horizon you should be just fine but the next couple years are going to suck if you pay attention to your values.    

Burn baby burn!

Come Dec 1st the market will turn down.

I am going to call it now.

@sellsellsell

I don't get it.

In the thread Frustrated - Mortgage Bubble 2.0 you write that you have been unsuccessfully trying to make multiple offers. Now you are predicitng a market downturn in December.  If you really think the market will turn south, why were you recently trying to buy multiple times?