Here we were, just about to close the office early and start getting ready for the Hayes Valley Holiday Block Party, when a story from The Bakersfield Californian lands in our inbox with a thud…
When house prices plummeted in the early 1990s, especially in Southern California, there was a serious recession, said Delores Conway at the University of Southern California’s Lusk Center for Real Estate.
Thousands of people lost their jobs and put their houses on the market, creating a huge surplus.
“As long as we have a steady job growth then people are not forced to sell,” Conway said. Even if house prices do dip, it should be a minimal drop, she said.
You have got to be kidding. Yes, house prices in Southern California plummeted in the early 90’s. And yes, individual financial hardship resulted in a huge surplus of properties. But NO, in this environment it’s not going to be “steady job growth” that determines whether or not people are forced to sell.
This time around, think over-leveraged buyers holding short-term interest only or adjustable rate mortgages, and novice “investors” with a portfolio of negative cash flow properties (and limited cash reserves). These are the new factors that will lead to forced selling (and potential surpluses). With, or without, job growth.
∙ Economist: Local housing market should stay strong [Bakersfield.com]