Business Q&A

Question:
I live in southern California, for the past few years home prices have skyrocketed.

Recently I noticed houses are selling slower and the prices are going down.

Does this mean that people who bought their house at the peak will lose money if they sale before the next peak?

Why do people buy at real estate peaks then?

If you lose your job or have to move then you are really screwed right?

People are going to be selling their houses for a lot less than what they paid for them.

They will sell their house but still be paying a loan off.

Wouldn’t it be best to not buy when houses are at a peak unless you plan to live in a house for at least 10 years?

Answer:
Right on all accounts. My dad was in real estate and I followed it about as closely as he did for over 20 years…I remember a time when houses went ridiculously up and up and up and then the market crashed BIG TIME. I'm talking houses dropping around $100,000…so yes people who bought then were really screwed if they wanted to sell anytime within the next 10 years…because it took that long for their houses to be worth what they bought them for. I guess those that bought either had to buy, or thought now is a good time to dump this place and move into something better…who knows..but they all bought….and no doubt regretted it since.

But that was because of speculation and real estate agents themselves were buying and turning houses over so they helped drive the prices up themselves. The government quickly came up with Capital Gains Tax to put an end to quick turnovers…people would basically fix and sell houses within 6 months or a year driving prices up…I don't really know what else factored into that "crazy period" but houses since have gone up slowly and stayed up. If you're near a big city, houses in the city will be worth a lot more even if they are pure garbage with no land to go with them…it's crazy. Any free land around us now is being bought by developers and either matchbox houses, townhouses or condos are going up….you do not see houses being built anymore…everywhere you go is a traffic nightmare and congested thanks to all these people wedged together like that.