Is it possible for real estate values to drastically drop?

Question

We all remember the Dot Com Boom. Prices in the market were soaring. Everyone had the intention to buy high and sell higher. I am seeing the same pattern right now with real estate. I see houses that people bought a year a go for $250,000.00 Sell for $375,000.00 In one year!!!!! So my question is as we all know real estate generally is a more steady market than stocks, so can values drop like stocks can? Or will they just slow and even out?

Answer 1

They can; just ask anyone who has owned property in one of those cities where they closed the military base and it was the sole reason people lived there! However, that is much more likely to happen on a local scale than a national one. Most likely, there will be a slow, steady decline in the national real estate market, now that the housing bubble has burst.

I live in a college town. For some stupid reason, idiots have been building HOUSES (not apartments) on every acre of unused land the past few years. Now those houses are standing empty. We'll see what happens.

Answer 2

Yes and no. It depends on the market and can even differ from street to street. Supply and demand affects real estate. Supply and demand is affected by the interest rates. When interest rates rise, then the number of buyers tend to evaporate since it costs more to buy. Conversely, when interests rates are low, the available buyers increase, the number of sellers can also increase as they want to take advantage of the increased buyers which would eventually lower housing prices since there then becomes an over supply of housing.

It is all relative. In my area of south louisiana, it is a sellers market since housing is at a premium but in the washington d.c. and those areas that have a lot of military personnel, the housing market has all but slowed down since the available buyers and sellers are either oversees or expecting to be shipped out.

I don't think that the country as a whole will fall under one category or the other at the same time. There are just too many variables. For instance, in New Orleans we are in a buy and hold mode since a lot of evacuees aren't returning so they are dumping their property at below wholesale rates to get rid of them. They have also pocketed insurance or disaster relief money which gives them more incentive to sell out. That property if held for at least 5 years will show benefit from a return to "normalcy" and again be worth preKatrina or better prices. Having said that, it still depends on the neighborhoods that you are investing in. Some have better outlooks then others. You have to know your market to make those decisions.

The point is whether you invest or not invest in real estate can't be decided on what area or another is doing but the "whole" picture. Well purchased real estate will always out do the stock market over a long period of time.

Answer 3

The best we will ever see I'm afraid is a slow down of thr rate of increase in a flat market. A property is a tangible asset and will almost always be sold at a profit no matter how nominal the margin. I can see maybe some govrenment regulation on the profit margin for selling a house, but the prices will rarely if ever drop.

Answer 4

They can drop and they have. In the early '80's the bottom fell out of the housing market in a lot of parts of Texas due to the oil bust. If your local economy collapses your housing market will, too.

Answer 5

RE value tends to follow trends in general. But in specifics, each section of RE is subject to social, political and environmental influences that can drop it's value in a heartbeat, or conversely, raise it.

Answer 6

Yes they can it depends on supply and demand and other factors,area of town,make of the area,

Answer 7

Keep in mind...........

Times and markets are changing!

In California with average homes selling well over $500,000, a 20% decline is $100,000! In any market 'timing is everything'! So, could you afford a loss of 25% of your investment all because of poor timing???

This last up cycle was 10 years in many parts of the country. The downcycle now started in CA, Wash DC, NYC, Vegas and other hot areas of the past are all soft and getting softer.

From 1990 to 1996, the average home in San Diego lost 20% of its' value! The cycle we are now enterng looks like it could well exceed that on the downside!

With all the 100% financing, interest only loans, EZ qualifing etc...even a slight decline will cause many to be unable to sell for the amount due on their loans!

For some great 'insider' articles on the San Diego real estate market, which I believe will apply to any of the hot real estate markets of the past five years.....visit:

Times and markets are changing!

In California with average homes selling well over $500,000, a 20% decline is $100,000! In any market 'timing is everything'! So, could you afford a loss of 25% of your investment all because of poor timing???

This last up cycle was 10 years in many parts of the country. The downcycle now started in CA, Wash DC, NYC, Vegas and other hot areas of the past are all soft and getting softer.

From 1990 to 1996, the average home in San Diego lost 20% of its' value! The cycle we are now enterng looks like it could well exceed that on the downside!

With all the 100% financing, interest only loans, EZ qualifing etc...even a slight decline will cause many to be unable to sell for the amount due on their loans!

For some great 'insider' articles on the San Diego real estate market, which I believe will apply to any of the hot real estate markets of the past five years.....visit:

http://www.brokerforyou.com/brokerforyou
http://www.downtown-san-diego-real-estate.com/san-diego-real-estate-article-index.htm
http://www.brokerforyou.com
http://www.san-diego-for-sale-by-owner.com
http://www.la-jolla-ca-del-mar-san-diego-real-estate-encinitas-california.us
http://www.brokerforyou.com/blogger/index.html
http://san-diego-coastal-real-estate.blogspot.com
http://sandiegofsbo.blogspot.com
http://downtown-san-diego-real-estate-views.blogspot.com
http://san-diego-coastal-real-estate.blogspot.com
http://sandiegofsbo.blogspot.com
http://downtown-san-diego-real-estate-views.blogspot.com
http://www.brokerforyou.com/san-diego-real-estate-sales.html
http://www.poway-real-estate.info
http://www.del-mar-real-estate.info
http://www.la-jolla-real-estate.info
http://www.los-angeles-real-estate-brokers.com
http://www.san-jose-real-estate-brokers.com
http://www.orange-county-real-estate-brokers.com
http://www.san-francisco-real-estate-brokers.com
http://www.sacramento-real-estate-broker.com