I also saw the housing bubble in SoCAL in the Late 80's. My area in particular (South Orange County) saw declines of 35% in my particular gated subsivision in Mission Viejo. It lasted until 1995 when it finally stabilized and only pulled back with real big returns being seen in 2002 - 2005. We eventually sold for double what we paid and we did not buy at the low.
That was our experience in SoCAL.
I have a slightly different theory (contrarian) regarding reasons why real estate will not stay high.
Baby Boomers, inheritances, ....... money, money, money
6.5%, I remember 12% and being grateful when we refinanced at 8%.
Housing is expensive, have ya filled your gas tank lately. Have you noticed CEO pay scales.......
Housing in New England dropped 45% ... not in my part.
I would not rely on baby boomers so much, most are deciding to stay at work till at the earliest 65 and more likely 70 as they can no longer afford to retire and move. Also more wish to be close to their children and grand children. This will tie them to the cities where they raised them. Florida realtors in particular are banking on all the boomers moving here from their opulent mansions in NY and Boston and paying way too much for local real estate. I think it is a dream and while some migration will occur, it will not be at the magnitude that the local realtors predict.
Also, interest rates are on the rise, the government is BROKE! Real BROKE! and getting even POORER! The way they get cash is with bonds and other paper, if rates are low, no one will want the paper and they will remain broke. The only other source of cash is taxes and they seem hell bent against raising them.
Also along with high RE priced come high re-occuring costs, TAXES!!!!!!!!!!!! we all seem to forget about that. I was paying $3750 per year on my SoCAL home, the prople that got it from me had to Pay almost $10,000!!!!!!! I could not afford to buy it back!
Back to RE.
Since then we Fired ourselves and took 2 years off sailing. Returning to the RE market in late 2005 in Northeast Florida. We secured a VERY REASONABLE rental on water in St. Augustine, giving us a lot of time to research the local market, which we have been doing very seriously since July 2005, anticipating our rental luck would run out at some point. By the way on any given day around here there are over 1000 rentals of 3 bed 2 bath 2 garage detached homes available for under $900! or 2, 2 condos/apartments for the same price. Check out the Flagler county pennysaver (Google it).
We are looking in the Local Market here from Pointe Vedre Beach to North Daytona Beach. It seemed to have peaked in October of last year. Now we see a steady decline in prices of Single Family homes (all our research is within 10 miles of the coast). I should take the time to define the market segments as I see them. I do not consider property under $200k in this evaluation as I am not yet ready to move into a >75 years of age mobile home park. That will come no doubt, but later. These are for single family homes about 2200 sqft and over. Condos are still pricey and demanding silly prices but not really getting sold in any great quantity. Investors seem to be about to bail or at least considering bailing. Realtors are finally starting to admit it is a buyer's market here.
Lower end = $200k - $400k
Mid end = $401k - $800
high end = $801 - ~
In the lower market end at the moment. $50k - $75k Reductions from October are not uncommon in asking prices, offers are encouraged at any level. We were not in this market but do keep an eye out for bargains. But we really want a place on water, golf or nature preserve. Only now is this segment starting to offer something to peak our interest.
In the Mid end of the market, which IMHO was grossly overpriced to start with we are seeing price drops starting to be realized. A particular home we were looking at in November last year for $729 just sold for $575, nice home wood not concrete, which is somewhat less desirable in these parts now, but nice home on salt water with intracoastal access. Our ideal property location. We will be buyers at under $500k. Still a way off.
As far as the upper end I have noticed no real reduction in prices, but I must admit I do not watch it very carefully.
I would be interested in seeing these kind of stats from different areas of the country.
SWR