Who will buy all that real estate?

Who will buy all that real estate?

Lately I have had several different people ask me what I think real estate is going to do in the future.

If you look back at the prices of houses in Sacramento, since before 1900 there has been a 10 to 12 year cycle in the prices.

The prices go up then peak, then pull back for a year or two then level out and get ready for the next cycle.

The last couple years we have seen some huge jumps in the value of properties in Sacramento.  One of the reasons for this is the news papers and the stories they run.

At the peak you will see stories telling about how 3 or 4 people were standing around a real estate agents desk bidding on a property the first day it was listed.  Then the property ended up selling for $15,000 over the asking price.

When people read this they panic and want to buy, they are afraid they will miss out and they rush out to buy anything at any price, why not the papers are telling them that what ever they pay it will be worth more next month.

Then things start to change, and slow down a little, that’s the stage we are in now, prices will decline for a year or two then level out for a while.

In a declining market the new paper runs stories with a caption like the one I read in the paper today “Who will buy all that real estate?“

The newspapers will start saying things like it is a buyers market, and prices are dropping so if you wait next month you will be able to buy anything cheaper.  People read this and stop buying and then the sellers who waited to long start saying now I want that top price for my house, but that price is gone so they have to compete with all the other sellers who want that great price and then the prices start to fall.

A 20% to 30% pull back is not unusual, if your looking for a place to live and your going to be there for 12 years or more, then don’t worry about it.

You will make money no matter what you pay now, or how much it drops.  If you might sell in a year or two then you better find a good deal because prices could be lower when you get ready to sell.