When times were good, people felt that houses made you rich. They only went up in value, and so the way to wealth was found by attaching yourself to the largest home you could possibly qualify for... except that during the last few years of the bubble, there was no "qualifying" for a home. You simply had to want one.
Today, especially at the higher end of the market, we have far more people wanting to get out of big houses than wanting to get into them. And that has obvious and ongoing repercussions for prices.
In previous posts, I have said that the first wave of foreclosures was caused by poor lending practices. Round two, which we are experiencing now, is because of job loss and deleveraging. People are fixated on getting out from under debt, on living small, and becoming financially nimble.
Houses, especially big ones, are illiquid assets that are difficult to move. The only answer, if you intend to buy a big house and want to be shielded from falling prices - buy it right. Buying it right sounds easy, but it's not. Buying it right involves work, conflict, and sometimes hurt feelings. When people feel like the pie is shrinking, they cling to what they have. For sellers, that means they are reluctant to let go of equity. For buyers, they simply refuse to overpay.
The concept of buying it right involves harder negotiations, more interaction with banks and short sellers, and lots more work all the way around.
You will continue to see real estate agents leave the business in large numbers not because there is no business, but because for many the business has become too hard. There are buyers and sellers - plenty of them - if you deliver great service and are knowledgable about your business. But that doesn't mean it will be fun.
Houses are neither rocketships nor millstones. They are uniquely positioned as an investment you live in, where you build dreams and bond with those you love. My advice to buyers today is not just to buy it right, but love what you buy. Because housing if for the long term, and if you aren't ready for the commitment, you should rent.
