There’s an old saying that you should be fearful when others are greedy, and greedy when others are fearful. In other words, you shouldn’t blindly follow mass beliefs because you could get burned. In perhaps no other investment is that more true than real estate.
Unless you belong to an exclusive elite class in society, almost always, real estate will be your biggest investment. As such, you definitely don’t want to jump aboard without doing your homework – and redoing it again multiple times over. Like we saw in the last housing crisis, a cataclysmic dip in prices could immeasurably impact your life.
Therefore, I found it curious that real estate prices had increased noticeably in recent years. While President Trump ran on the promise of revitalizing the nation’s economic machinery, the harsh reality is this: our economy still stinks. That’s part of the reason why gold prices have ticked higher during the past few months.
Moreover, many industry experts state that no housing bubble is coming. Interestingly, my local online housing resource SanDiegoRealEstateHunter.com listed five reasons why we won’t experience a bubble (and subsequent collapse):
- The economy is strong
- Home values will grow moderately in 2019
- There is a low house inventory
- The population is growing
- More millennials will be purchasing homes
If true, these factors should provide confidence to would-be buyers. But I’m not so sure and here’s why:
Real Estate Sellers Are Getting Antsy
If indeed we have a low house inventory, we should predominantly recognize evidence of a seller’s market. And to be completely fair to SanDiegoRealEstateHunter.com, the bulk of this article was probably written earlier in the year.
But in the here and now, I made some surprising observations. Perusing popular housing websites, I noticed more than a few sellers dropping their listing price. And we’re not talking token amounts either: multiple percentage points, which amount to tens of thousands of dollars, were slashed.
This real-time observation suggests that while an inventory shortage may exist, people currently can’t afford them. A possible explanation here is that the folks who could afford homes already bought them. Now, sellers are trying to address the second wave, who simply don’t have the funds.
From here, basic economics will take over: prices must decline further to hit an equilibrium point. And competing sellers will see what others are doing and respond just a hair more aggressively. This could be the beginning of the “silent” housing crisis.