Things are just done a little bit differently in California.  The Golden State is so well known for having its very own unique and often quite extreme culture.  Big surprise – the very same holds true for the California real estate market.  It’s “to the limit” and comparable to no other market in the nation.

After all, where else could you find a 450 square foot cracker box sell within hours of being listed for a half million dollars?  Well, that was the problem not very long ago anyway.  But in today’s overheated California real estate market, that same house is sitting vacant and will be for a long time to come.

Between those caught up in subprime loans to those with skyrocketing variable APRs and interest only mortgages, so many who were forced to buy at all time high prices are now being forced to sell or turn over their properties at fire sale prices.

I’m sure you’ve read or seen the crisis all over the news for the last several months, but it only looks to be getting worse.  Median home prices in Sacramento have tanked from around 340k to 315k just since this January while months of inventory has also increased about 40% over the same time period.  These are just typical numbers for California.  In fact, many parts of Southern California have fared much worse.

So have investors felt the pain yet?

Actually, the answer really depends on the type of investor, how long they’ve held a property, and how long they’re willing to hold it.  Those that bought into the market five or more years ago are probably still ahead of the game.

Long term investors that made average purchases over a year or two ago might be down big time.  They can still hold and rebound, as real estate has a fantastic history of trending up and up over time.  But if they’re having trouble with their financing, they might just be in big time panic mode.

What about the flippers?

It’s not pretty for the flippers.  They’re hurting in Sacramento.  They’re suffering in San Diego.  It’s the same sad story in Irvine.  Flippers in California have had their day and probably will have it again, but for now, times are extremely tough.  I guess a trendy form of real estate profiteering such as flipping will ultimately follow the broader trends of the market.

What’s in store for the future?

Well, it’s not all doom and gloom for the California market.  There are a few limited bright spots.  And the economy as a whole does look to hold strong.  For long term investors, the next several months might be the perfect time to purchase property at bargain basement prices.

Next in the California Real Estate Series…  The daily must reads for those invested in California real estate.