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The classic fable of chicken little is about a chicken that is hit over the head with an acorn and becomes convinced that the sky is then falling.  In modern times, the fable has come to represent someone who is mistaken about imminent danger.  So, how about that real estate sky? Is it falling?  Or just a (big) acorn?

I think, if we were chatting, you would agree that at least the media is going with the falling sky theory. They love the sad story (and there are plenty of them), the scary story, the watch out when the next wave of interest only,   option arm loans hit, then you will really see a foreclosure crisis story.  Chicken little seems to be a media darling..and you can't blame them for courting her...who has ever seen a market quite like this one?

If you were to ask an appraiser (I happen to be married to one, so I do not have to ask), he could provide you with his opinion as to how much the sky may be falling per month in a particular county or area.  He may tell you about the impact on values and discuss things like negative time adjustments--the amount appraisers adjust down the sales price of a comparable property to account for the loss in value since the time of the sale.  For example, if a sale occurred in early January and the appraiser is using it as a comp for a property in early March, the appraiser may adjust down the sales price from that January sale by a certain percentage (say 1/2% to 2% of the purchase price) per month to account for declining market values. 

But does Chicken Little have the buyers' ears?  

Not as far as I can see.  Buyers seem to be coming out of the wood work the last few months.  They are educated (Trulia, Realtor.com, etc). They know the market.  And, they are ready to jump on a bargain.  Earlier this week on a well priced town home in the Tustin Ranch area there were 22 offers in after 2 days on the market.  On a foreclosure home in Yorba Linda there were 25 offers in on one weekend.  All of my listings have had multiple offers.  As I see it, Chicken Little's cries are not scaring buyers out of the current real estate market.  

I have also found that first time home buyers are also not listening to our chicken friend.  Several of my clients have said that even if the market continues to drop, they are in for the long run and see the current market with low prices and affordable, 30 year fixed interest rates at or below 5% as a huge bargain compared to what they could have afforded a couple years ago.  Other clients are asking me to check their math as they calculate that with a small down payment,  it can be more beneficial to buy than to rent.  This has not been the case in Orange County for quite some time. The simple math is convincing them to become homeowners.

My thoughts on this poultry fable?  Its the buyers who write the ending to the story.  If would be buyers opt out of the real estate market, Chicken Little could be right.  The sky could fall.  No buyers means prices in this market decline further and faster.  If, however, buyers continue to come out and play, its going to be a fable about a real estate acorn (granted, a big, painful foreclosure, short sale, mortgage meltdown acorn), but an acorn nonetheless.   From what I have seen the last few months, it looks promising.