Question: Timothy, Google News - Tech job cuts totaling 1,100 jolt Silicon Valley, East Bay Housing market in Bay Area will crash due to over priced. Is now a good tim
Answer: I agree that we have seen some layoffs. I have had two clients recently laid off, however they got a new job immediately since there is strong demand. There will not be a Real Estate crash. We have had only two RE crashes in our lifetime. First was in 1989 because the Savings and Loans gave phony loans to unqualified buyers. The second was in 2007 when the banks i.e. Hedge funds decided the chop up the loans and sell them in bulk. This allowed the banks to give extremely high risk loans to buyers who could not qualify, thus a crash. A crash can only happen when buyers have nothing invested in the home and are willing to walk away. Over the past 10 years, the buyers have been putting down a minimum of 20% (With some small exceptions such as FHA). They have been the most qualified buyers that we have ever seen, with very high fico scores and very high incomes. A buyer is not going to walk away from their home that has 20% equity plus the equity built up (Between 20 to 60% since the bull market started in 2014) simply because it comes down 10%. Just will not happen. We have already come down 12% since August of 2018 when the market peaked, yet we did not crash. The fact that we have not crashed combined with super low interest rates and high stock market has caused this spurt in the market we are currently experiencing. You can relax my friend. We are experiencing a normal market slow down that happens after every peak. The hot market right now will most likely be temporary. Remember the cardinal rule of Real Estate. Home prices can only go up as high as buyers can afford to pay. Simple as that. Buyers have gotten a windfall with the stock market and low interest rates lately and they are taking advantage of it. The only time a crash happens is when buyers have nothing invested in the home and are willing to walk away, which happened in 1989 and 2007. Remember dot com crash? Real Estate did not crash or even come down during that time. I hope this answers your question and reassures you that a tech bubble/crash does not translate into a Real Estate crash.