Looming Recession
All said and done home prices are silly in many part of the world, not just SD. A correction will come about when there is a recession, and a recession will come about some time in the next 1-3 years. I think all Piggs are probably Fed watchers, which is central to so much forecasting. A combination of serious problems in China, asset over-valuations and the Fed’s eventual tightening is apparently going to bring about a lot of volatility soon. The longer they put off raising rates, the more nervous they appear, and the more volatile things will become IMO. Wildly fluctuating commodity prices, devalued currencies and increased borrowing costs in EM’s plus a recession in Asia are forming like a dark cloud. Something has to give. Let’s face it, China is a huge force now so coupled with the US there is double the chance of things going wrong with the global economy.
Home Price Correction
I believe the likelihood of a home price correction sits somewhere between very likely and inevitable. That realization will fall sharply into focus when rates normalize (revert to historical averages). At the moment, values are being measured by the ‘monthly nut’, so actual values are considered irrelevant by the Fed. They believe levels or personal indebtedness are more important, and I presume that means since subprime is not present we have less to fear.
Financially Savvy
If you look back over the last twenty years, I’m guessing home prices have increased three to fours time higher than wages. I know that to be the case in some markets so it’s sure to be true to an extent in CA. I would not buy now. I wouldn’t have bought even in 2012. Prices would need to drop quite a lot before I’d consider buying in CA, either for a home or as a investor. Simply put, prices are silly so ‘caveat emptor’ your personal balance sheet before you look beneath the bonnet of your dream home.
