The negative year-over-year price trend in Southern California is not surprising. The overall market is still inflated and delusion still runs rampant. If you follow previous historical manias the true bottom is usually reached when most of the public concurs that said object of mania is rejected nearly at all price levels. We are nowhere near that level of capitulation. The next phase is bottom investors picking up homes in lower priced markets. 30 percent of sales last month in SoCal involved all cash buyers picking up homes for a median price of $190,000. Yet a fascinating thing that is now occurring is the places to hide are getting smaller and smaller. There are many psychological trends that have hit in this bubble and the one that seems to remain is the one of selectivity in niche markets. There are only a handful of people that now say “well that isn’t the best part of the 90210 or San Marino will not go down.” Well it will go down but nothing that you will be able to afford! The other 98 percent of areas where people live prices are adjusting and in many mid-tier markets. These delusional folks somehow think they are going to buy a million dollar home on a low six-figure salary (or even less). Champagne taste with a beer budget. Today we see a home in the 90210 zip code that is now back to 1989 price levels.
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