California - Boom or Bust

[Account Closed]

Hello all, 

I understand real estate cycles are market specific, but I've always been curious about the reference to California as a "boom or bust market." Is the term "boom or bust" simply reference to appreciation going crazy during booms, and then declining rapidly once we reach a recession or hypersupply? 

It makes sense to me that "boom" would refer the the large increases in equity that can happen over night, and then be lost in a "bust" almost instantly.  

If anyone reading in California has been through a few market cycles, could you please let me know how bad the busts have historically been? Is there a percentage that home values typically fall?

I'd appreciate the info. Thanks in advance!

-Taylor

[James Kojo]

source: https://fred.stlouisfed.org/series/CASTHPI

I'm a long-time resident of the Bay Area (Silicon Valley). I moved here with my parents when they immigrated in 1978 or so, and I've lived , went to school and worked here since then.

I'm not so sure I would call real-estate here a "boom-bust" cycle so much as a continuous upwards trend with a few notable reversions to sanity and one very notable boom-bust cycle (which the entire nation seem to go through at the same time.)

I've never met anyone here that has ever thought buying was a good idea at anytime, myself included. With 20/20 hind-sight, they have all been wrong (myself included) unless they bought in 2008. Everyone always says that "it can't possibly go up anymore!" I have literally heard people say that throughout my entire adult life. Luckily, I've been an owner since 2001. :) Somebody has literally paid me to live in every single house I've owned since then. Unsustainable you say? Perhaps, but the market can remain irrational longer than you can remain solvent. I would be careful trying to play the "market cycle" game here and wait for dips. It's not as simple as some of the podcasts make it sound. :)

Most BP'ers will tell you not to try and play the appreciation game, because it's akin to "gambling." I only somewhat agree. If you're going to play the CA market, then appreciation is pretty much the only game in town.

That all said, real-estate is always local, and CA is no exception to that rule. If you're looking for cash-flow in CA, I'm sure there are pockets where you can get it. As a matter of fact, if anyone here knows of any, I'd love to hear about them.

Back to your boom/bust cycle question though: I get the impression that states likes Arizona and Florida have more severe cycles.

Hope that helps.

James