Oh yes...I was not only "around" during the RE crash of the late 80s to early 90s....I was right in the middle of it, making money helping buyers and sellers make the best of it.
Here's a crash scenario which actually occurred right next door to my house. Husband & wife brain surgeons bought home at height of the speculative bubble for $650K. Immediately made approximately $100K worth of improvements/expansion.
Divorced a few years later....sold home for $450K.
Lucky new owner still living there. Home now worth approximately $650-700K, roughly by my estimates. It's not a very big place, either. Just a rambler built on a slab w/ one-car garage. One of the tiniest places in the neighborhood.
Please note my use above of the phrase "speculative bubble" to describe what happened in my area during that time. People were turning over houses to make more money on the next one like there was no tomorrow. Prices were skyrocketing. Cocktail party conversation revolved solely around how much more one guy had sold his house for than he had paid for it only 6 months before.
It hit a wall when the buyers looked around and said, "Is this all I can get for that much money? I'm keeping my current house and building an addition on it." End of buying binge, for sure.
What I have seen in my area in recent years does not have the characteristics of a speculative bubble. I don't see people buying homes and turning them over quickly just for the gamble of it all. If they were, we'd have two or three full pages of open house ads in the Sunday paper for my zip code, instead of a mere column or two. Pages of ads were exactly what we had when the market went bust over a decade ago. Now you can hardly find an ad for a house under $1 million at all--they're selling almost immediately. I believe there is some slowness in the multi-million range, because those same ads keep popping up week after week.
There simply haven't been enough sellers to accommodate all the buyers. And I continue to assert this is due to scarce land, scarce housing opportunities, easy affordability in a high-income area, and LOTS of households needing or wanting a home.
If interest rates go up a bit, or if prices come down a bit, the same underlying supply/demand imbalance is going to be there--in the seller's favor--for quite a while, I believe.
Note also that if the first owners had kept the house until now, they would be even and probably wouldn't be sweating the real estate market's ups and downs one bit. They'd be happily owning it for a long time, which is what we're supposed to plan to do when buying real estate. |
