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I don't know how many here follow the stock market closely, or at all, but for those who don't, here is a very brief and general observation about it.
Beginning roughly 2 years ago, the stock market in the US went on a rip-roaring tear. Some might call it a "bubble". Whatever you call it, the prices of nearly all stocks went up, but the prices of some of the really high "growth" stocks went WAY up.
However, in the most recent 4 to 6 months, many/most of these really high flying stocks have been cut in half while at the same time the lower price "value" stocks have continued to rise at a slow steady pace.
Some may wonder "What the hell does this have to do with real estate?" Well, here's my answer as to what it has to do with real estate. I think that various real estate markets are going to react pretty much the way the stock market did in the past few months only it's going to take more than a few months for it to be fully carried out.
In other words, if you're living in one of the really "high growth" areas where the price of an average 3 BR home zoomed from a few hundred thou to $1.5 Mil, then you had better be prepared for a correction similar to what happened to the high-flying stocks in recent months. Oh, it's not going to happen overnight, but it will happen in the next 2 years or so.
Likewise, if you live in an area where the price of a typical 3 BR home has increased some, but at a slow, steady pace, then it's likely that nothing much is going to change. Your home will continue to hold its value or perhaps even increase slightly.
Just thought I'd give some folks here a "heads up". The people who were holding the high-flying stocks 6 months ago didn't think there was anything to worry about either, but events have proven them wrong.
The main difference is that you cannot live in a stock. You have to live somewhere.
That's true, but financially speaking wouldn't you rather live in a house that holds its value for the next couple of years instead of one that loses 40% to 50% of its value? Even if it only loses 1/3 of its value in the next couple of years, that's a paper loss of $500k on a $1.5 Million house.
Of course, if you don't sell, then you really haven't lost anything, but if you should want or need to sell, it will be a costly price to pay for having bought at the top of the market, or for not having sold at the top of the market.
Of course, if you don't sell, then you really haven't lost anything, but if you should want or need to sell, it will be a costly price to pay for having bought at the top of the market, or for not having sold at the top of the market.
Relatively speaking, very, very few people are in a situation where they bought at a peak AND they are forced to sell when it is lower.
Location: Formerly Pleasanton Ca, now in Marietta Ga
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While the prices may come down temporarily, they will rebound and exceed.
Last recession I sold a home for 700k. In the next few years it dropped to 550k.
Today it is worth 1.5 million.
If you are in for the short haul you might get hurt, but if you bought it for your long time home you will be fine.
Relatively speaking, very, very few people are in a situation where they bought at a peak AND they are forced to sell when it is lower.
What if they are transferred by their company, or if they get a MUCH better job offer in another state? Are they going to turn down a great opportunity just because their house is worth considerably less than what they paid for it?
What if they are transferred by their company, or if they get a MUCH better job offer in another state? Are they going to turn down a great opportunity just because their house is worth considerably less than what they paid for it?
I guess that’s the few people he was referring to.
I know that if my house lost 50% of its value but I’m still working and earning the same money, I’m not looking for opportunities that would require me to move. Also, when home prices are contracting to that degree, job opportunities probably aren’t that plentiful anyway.
I guess that’s the few people he was referring to.
I know that if my house lost 50% of its value but I’m still working and earning the same money, I’m not looking for opportunities that would require me to move. Also, when home prices are contracting to that degree, job opportunities probably aren’t that plentiful anyway.
The bolded in your post is the big "IF" that many people face. Deep recessions and severe drops in housing prices kind of go hand in hand.
If a person has overpaid for his house and a deep recession comes along and he either loses his job or has his income reduced due to loss of business or reduction in work hours, then it might be necessary for him to look elsewhere for a job that will pay the bills. Many times, this causes the need to relocate to a different area.
At this time, however, there's little that most people can or will do if they have already bought at the top of the market in an expensive area other than try to keep some cash reserves in hopes that it will tide them through if/when real estate prices start falling in their area.
I know that the Great Recession of 2008-09 hit real estate hard in many areas (not just the wealthy areas), but if a person kept their job and their income and didn't need to move, then they did OK after several years because the prices eventually came back up, but it wasn't a quick recovery. It took 5 to 7 years in some locations just to get back to even.
While the prices may come down temporarily, they will rebound and exceed.
Last recession I sold a home for 700k. In the next few years it dropped to 550k.
Today it is worth 1.5 million.
If you are in for the short haul you might get hurt, but if you bought it for your long time home you will be fine.
I agree. If you fence sit and are terrified every time the housing market goes up and down, you ultimately will be a renter buying someone else's home for them for the rest of your life. And, not to mention supply and demand? I think there may be a correction in some markets, but on a whole not a drastic change.
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