According to DataQuick, the median price home in San Diego fell $15,000 in December 2005. This was the biggest drop in 18 years. Is this simply a pause that refreshes ... or is this the beginning of the avalanche? Robert Campbell
Historically, real estate has gone up what, about 8% approximately on average? Is it even that high? Stocks show a better return over the last 100 years or so, last I read S&P avg. about 11%. The 8% gain doesn't count the big money some folks dump into repairs/upgrades for their homes. However, it is easier for people to luck into the big gains simply because they were living there when it went up in value - easier timing than other investments. IMO, there will be a pullback in prices, not a crash - simply because markets tend to revert back to the mean at some point. Also, I live in AZ - and I know that people tend to underestimate the effect of both legal and illegal immigration holding up home/condo prices (high rental demand as well as fairly hot buy/sell market) Also, I am in the mortgage business - and I am watching people's appraisals start to come in a lot lower that what they thought their house was worth - sometimes by $20 or 30K. My friend the realtor says that in our area, the supply of available homes has just spiked up dramatically in the last couple of months to record levels. Just a few months before that, the supply of available homes on the market was very low. You do the math.
>>>>>Historically, real estate has gone up what, about 8% approximately on average? Is it even that high? The U.S. median priced home has appreciated slightly above the rate of inflation for the past 50 years or so. Leverage, of course, magnifies those returns.
The ironic thing is people said that 1st they cant lose, now people are starting to say its a long term investment. hmm, what does that sound like.
>>>>The ironic thing is people said that 1st they cant lose, now people are starting to say its a long term investment. hmm, what does that sound like. Sounds like a historically reliable indicator as to what direction the current trend is moving.
I was one of the people who cashed out. And like a few of my friends who cashed out we are all looking to get back in on a pullback. How deep do you think the pullback will get before everyone who could not afford san diego would be willing to pull the trigger to live in one of the best climates in the world. My bet with my money will be 30%. And it assuming it is still a safe place to live on the sell off.
I suggest you read the 2nd Edition of Irrational Exuberance, it has some interesting points regarding the housing market.
We appear to be on the same side of the argument, but houses have not historically appreciated by 8% per year, they have instead appreciated by slightly more than inflation. I would have to go back and find the relevant quote, but Shiller's book mentioned something along the lines of historical real returns in the housing market being something like 0.4% per annum. My interpretation of this was that a home to live in is actually a pretty decent investment (if bought at the right time), but houses are actually fairly crappy investments beyond that (not counting speculative periods).