Further Bifurcation

Been thinking a bit more about what the next year or two will bring in terms of local real estate trends. They way I see it, the lower end is starting to stabilize. But the higher/desirable end (i.e. areas people would prefer to live) will be broken into two distinct patterns.

In areas with substantial new development (homes built in the last 10 years), such as Elk Grove, Rocklin/Roseville, Folsom, El Dorado Hills, West Sac etc. home values will fall fairly fast. Many homes in these areas were built and bought at or near the top of the market. Thus they are much more likely to see a disproportionate number of foreclosures due to the heavy use of Option-ARM and other affordability products, which puts substatial downward pressure on prices.

Established Sacramento neighborhoods, like East Sac, Arden/Arcade, Fair Oaks, Davis, Land Park etc. will fall at a much slower pace. As a percentage of total homes, there will be fewer buyers who bought at the top (but probably some who HELOC'd themselves into foreclosure). In general though, these owners are much less likely to be upside down.

Eventually, those who would have purchased in a more established neighborhood, will opt for a less expensive newer neighborhood (I know we did). This drain on demand will eventually push down prices, or at least keep them from appreciating in the established neighborhoods.