There are always a certain number of forced sell situations arising. Death of a family member, severe illness with the corresponding high medical bills, divorce, job relocations, etc… In good markets these sales will not affect the going prices much. However in bad markets they can have a big effect. Just think of the families that bought in Del Mar in the 1970s. What happens when one of them gets cancer and needs a great deal of care? Once the insurance quits paying (and it always does) then it’s time to tap the house. They only paid $200K for it and if they can get $900K they can pay off their bills and still have enough left over to get a little condo in a senior community. So what if they could get $1.3M if they kept it on the market for 6 months. The bill collectors are calling today so old Mrs. Greene says “sell sell sell!” and someone gets a deal. Meanwhile everyone else in the neighborhood groans as a new low watermark has just been established.
Also, consider those aging families who had a substantial amount of their retirement in stocks and just lost half of it! Where is there retirement money going to come from now? You guessed it, that house they bought in 1972. Sell it and move to a senior community in Arizona with a nice chunk of change. Dad was tired of keeping up the yard anyway. He doesn’t get around like he used to, you know? And that dry heat is good for Mom’s arthritis…
I know, I know, these are contrived and unusual scenarios. Such sales will be overwhelmed by the hordes of Chinese tourists stepping off the cruise ships with suitcases full of money to purchase CV homes in cash. And of course all of the high-flying $250K/yr sales professionals and attorneys who will never be affected by the current downturn.
