Quote:
Originally posted by Pornwolf
Buying property in prime areas of Cali, NY, Florida or any other major metro is never a losing proposition. It never will be. As long as people still gravitate to those areas, and they will,
property values will steadily creep up no matter what the rest of
the market is doing. You can count on this.
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Hardly. If the undesireable areas take a 50% loss, you can bet that the desireable areas will take at least 40%... at least in the areas I am talking about in Northern California.
Maybe NY or Florida is a different sort of whacky, but I can't imagine that BUYERS would still pay doubled or tripled (over hte past 10 years) pre-bubble-burst rates - or more as suggested in other posts. Why woudl they do this when the other 80% of the market (the less desireable areas) has dropped in half and become a buyers market.
I think if gains are lost via a real-estate bubble burst (not just normal RE pricing fluctuations), the losses will be across the board for the most part.
If you want a stock market analogy..The stock market has its "sectors" that get effected more than others from time to time (like neighborhoods)... but we are talking about the RE "Bubble" bursting here as a whole.
Anyone who's actively traded in the market understands just how crazy things can get when people panic. When they are losing/making money hand over fist - they panic & make decisions that arent very thought out.
The market makers know this and (in the stock market) milk every panic buy/sell run for every dime its worth... right now its safe to say that the RE market is/was going through a "panic buy" stage.
When enough people start thinking that they may have paid too much for this houses... they start looking at those for sale signs popping up everywhere & wonder why the "SOLD" signs don't pop up anymore (layoffs, bad economy).... then they think they better hurry and put their house up too (usually the preserve the little gains they have.. but instead the contribute to what will be the SELLING PANIC)
Anyway...the equity markets are led by market makers that jerk around the pricing and in the process of making the markets, "trap" investors into buying higher & selling lower.
The RE markets are pretty much the same, but they are led by brokers... if the neighborhood is hot, they will put their next house up at 20% higher than their last and see what happens. If enough of these RE market makers do this, they can effectively set the market price for that market. The buyers will see that and think that the market/demand is going up and they better hurry up and buy.
The question is.. can the buyers afford it now? There is always a "better neighborhood" to move into if you have the money.
The markets went up so quickly because of all that funny money that was around in the DotCom days. There were tons of high paying jobs (based on funny money) to support the rate of growth the RE market had (people with new high paying jobs need new places to live)... But now those jobs are gone for the most part, and alot of these people are moving/have moved "back home" wherever that may be.