One could think there are many factors that could contribute to a decline in American real estate prices:
* Nesteggs took a beating in the past year. (Sell the house? Put off buying a house?)
* Layoffs across many sectors, including dotcom firms closing up shop altogether.
* Spiking oil and energy prices (home heating bills up 50%!!)
* Absence of stock returns to supplement annual income.
* Income of fixed income retirees plummetting as CD's mature and current interest rates much lower.
With these factors in place, I have been predicting a real estate correction since the summer of 2000.
However, this has not panned out as I expected. I did read somewhere that it took about 2 years after Japan's Nikkei crash for the real estate market to finally start its descent. Perhaps I am just a bit premature with my predictions?
Though sellers may not be experiencing the multiple bidding frenzy of the past, it still seems that prices have hardly corrected.
Will they? Can they? etc, etc...
It does seem like we've finally started a correction in commercial real estate, namely in CA, where many dotcoms have evaporated.
siliconvalley.com
latimes.com
www0.mercurycenter.com
But it also seems like a single family house can be a serious money pit in the midst of a recession.
When a family is facing a layoff, all of a sudden all the associtated costs of maintaining a home seem much more intimidating.
Landscaping, heating, property taxes, mortgage, etc... This can become unmanageable, no ?
But unless people actually leave the country (or go homeless), doesn't real estate seems somewhat a zero sum game. If they sell, where do these people go in an extreme scenario? Do they rent? Buy a smaller, more affordable place?
Do people sell (or forclose) their houses and rent smaller apartments?
Would that make apt. rents increase?
Or do people start living in more cramped (and cost efficient) conditions (ie: sharing an apt) while riding out the storm?
Or do the simply leave expensive metro areas and head for $100k houses in Alabama?
Or move the family back to their parents house in the midwest?
I'd like to hear people thoughts, opinions, experiences, and anecdotal evidence on this topic.
Perhaps anecdotes related from the early 90's real estate correction? Or is it a case of "it's different this time" ? |
