After the last collapse, my brother in law in Phoenix walked away from a bunch of houses.
We’ve been down this road before. It will almost certainly be even uglier this time. My old house in Seattle went from $320k to around $520k and back to around $270k in the last bubble and bust. Right now zillo has it at $1.3 million, which is ridiculous. It was worth about $35k when it was new.
The most important indicator for him:
Whenever a new development was built in his city, he'd make some inquiries and see who was buying these properties. The tipping point for him was when a new luxury condominium tower was built ... and every unit was sold before construction began ... and he found out that only THREE of the 80+ units were sold to people who intended to live there.
Here, the property appraisal for taxes goes up, up, up. It never went down during the housing bust. Doesn’t matter that it’s falling down around us.
A friend of mine lives in a modest area of Sunnyvale. It’s a Mexican American area, and his family has lived there since the 70s, in a tiny, basic, unrenovated 2 BR, 1 BA bungalow that cost about $30,000 at the time. It’s now worth well over $1 million.
So yes, things are way overpriced, way beyond their actual value, and that can’t last forever.
Houses sell, but not as spec properties; and yes, prices will go down - and have to go down - to something realistic. People are moving out of California in droves because they can’t find housing. The same is true in New York City. Depending on an insane real estate market to fund your state or even your personal economy is not really a good plan.
if $1.3 million is ridiculous then SELL SELL SELL
You can get a mansion in Buffalo, NY for half that- and retire on the rest and enjoy 4 seasons.
I remember meeting a guy who had purchased half a dozen new houses in Gilbert, AZ that he was holding vacant.
He bought the first one with cash and then borrowed against that one to buy the next one, and so on.
His "theory" was that the market was rising so quickly he could afford the carrying costs until he sold out at a big profit.
Seemed like a crazy idea at the time and that was in 2006.