bubbleinfo.com

The prognostications are increasing.  Did you hear that guy suggest that prices are going down 50% to 80%?  Please notice that these remarks are said by people trying to sell you a book.  The more hysterical, the more book sales.

These guys aren’t realtors.  They’re statisticians, at best.  They don’t add in the emotional factor to their equations.

At 80% off, houses would be selling in Carlsbad for $120,000.  We would have to be well on our way to a Mad Max/Road Warrior environment for that to happen.

At 50% off today’s median sales price, houses in Carlsbad would be selling in the $300,000’s.  This is probably the lowest it could ever go, without a major catastrophic event.  Houses seling in the mid-$300,000s will break even with a 10% down payment – the rents will cover your PITI payment

If houses in Carlsbad were selling for $300,000 to $400,000, would you buy one?  How about $400,000 to $500,000?  I think there’s plenty of buyers who’d jump to buy the right house in Carlsbad under $500,000. 

Who’d be tempted to buy, if they found the right house?  

Sales are down 23%, but there were still 248 closed sales in March - who are these buyers?  Who has the guts to buy in the face of the bubble? 

PEOPLE WHO WOULD BUY, IF THEY FIND THE RIGHT HOUSE

First-time homebuyers.  Affordability is tough, but for tenants who have the ability to buy and are still renting will still want to get in at some point – they’re not in yet.

Today’s sellers who then rent.  They experience the emotional tug of home ownership, have money in the bank, and will want to get back in. 

Transferees.  The bio-tech industry, for one, brings high-income people here.  Usually they bring the equity from their last house with them.

Recently-successful businesspeople.  You’ve been working your whole life to build a business that is finally paying off, and you’re flush with dough.  It could be because of the high-income producing nature of the business, the sale of the business, the selling of stock options in a business – however the success comes in accumulating capital, they are buyers.

Newly-married people, especially the remarrieds.  There’s not a more motivated buyer than the guy who just married his second wife, and they’re living in the first-wife’s house.

Inheritors.

Grandparents.  Time is running out, and they want to be near the grandkids.  Think they care about the bubble?

These are the people that are willing to buy now, if they find the right house at a decent price.  They have wants and needs that surpass, and overcome, price issues.

The question that nobody can answer with certainty is this: Will there be an overload of desperate sellers? 

And will buyers hesitate if they start hearing horror stories?  Not for long.  I think any stories of desperate sellers dumping on price or getting foreclosed will cause fascination, bringing everyone out to watch.  Buyers will buy just to say they took advantage of some poor guy, or because they got a foreclosure.

Because of the boom over the last 6-8 years, there is heightened awareness about real estate investing.  When real estate is going up 20-30% per year, it’s easy to play the game – it’s hard to make a mistake, really.  But when prices go flat, you can make big mistakes and get hurt, financially.

But it has also taught a whole generation of how beneficial real estate investing can be, when bought at the right price.  There is no drop off in demand here, it’s just a price issue.

That’ll cause people to proceed with caution, but there’s still plenty of buyers.  We’ll see more focus on finding the house that suits your needs perfectly.   That’s where good agents can really help buyers, by searching out and finding the right houses for the right buyers.   With the huge inventories, it is NOT EASY to keep an eye out for all the good deals, get some good-quality help!