The beaches are beautiful and the flowers are blooming, but the real estate economic horizon is still a bit more dooming.  Real estate stability may still be just out of focus, but changes to the prescription appear to be upon us.

Through 2009 and the beginning of 2010, I have noticed an increasing number of foreclosures and short sales on the market in the Santa Cruz County beach and mountain areas.  As of today, foreclosures and short sales are accounting for approximately 50% of County of Santa Cruz's residential sales.  I would expect this pattern to continue in 2010 with a higher percentage in short sales than there are in foreclosures.

On April 5th, the Obama administration is supposed to be implementing their new short sale program.  As I understand it, the intention is to reduce the number of foreclosures on the market, and increase the pro-activity of the banks and borrowers to resolve their problems with a little government kicker.  The initial plan which has not been finalized has the government offering minimal payments to both the borrower and the bank for their efforts in resolving their debts.  The plan as proposed is outlined by the New York Times on this link:

http://www.nytimes.com/2010/03/08/business/08short.html

Currently, it is widely viewed that the main benefit of a short sale over a foreclosure is that  the owner/borrower has a slight reduction to the damage on their credit score, and possibly a better moral feeling with a short sale vs. a foreclosure.  On the contrary, the benefit to the bank is that they do not have to worry about  legal expenses, clean-up, resales, bankruptcy filings, and a multitude of other community and governmental fees.  Both sides do really need to hold hands some to get themselves out of the financial mess that's been created. 

As with almost all fiscal policy measures, I would guess that this will take a long time to realize the long term benefit.  I would expect to see a better quality of home on the market as approved short sales, and an increase in the median price due to a shift the the dollar amount of the middle sales number.  The bottom end of the market will likely be stable, though the number of first time home buyers with government incentives expiring should be declining. 

There are always changes coming out on the horizon...