So where are housing prices going next? Everyone has an opinion, most based on emotion as opposed to facts. The facts are that real estate is local. If the state of Florida’s residential real estate is down 16% year over year, that does not mean that every house in the state of Florida went down exactly 16%. There may even be homes in the state of Florida where there is no price decrease year over year, and maybe even an increase! So always do your homework before stating an opinion about real estate.
A recent headline said, “National home prices are forecast to shrink another 11%. Miami, Las Vegas and Phoenix will record steep declines, but a few cities will actually post gains.” So should you not buy a home in Las Vegas? Not necessarily. First, its tough to be a market timer, especially in real estate. Second, maybe the neighborhood you want to buy in is centrally located, has great views, or contains the most popular country club in the state; and prices are not going down in that neighborhood. Last, maybe the seller has reduced the price below the market, and you have some built-in protection against a real estate decline next year.
Most people do not research the basic underlying fundamentals in what supports real estate values. These would be population growth or decline, job growth or decline, local salaries, and foreclosures and housing supply. Most people simply look at which way prices have been going recently, and extrapolate out from those figures. But look at the fundamentals first, and if you see falling unemployment, population increase and steady salaries, real estate values are likely sound in the near future, regardless of what they are doing at that moment.
In Washington DC real estate, in the 1930’s during the Great Depression, real estate only went down 30% in general. Some homes and neighborhoods may have only gone down 10-15%. When some areas in the U.S. suffered 90% real estate declines in the Great Depression, a 10% to 30% drop seems reasonable in Washington DC. So again, the moral of the story is to do a lot of research, look at the fundamentals, and then make your decision.