The California Real Estate Boom Is Over. What Now?

Real Estate. I write about investing in local real estate markets.

If you had invested in a property in San Francisco five years ago and cashed out in 2019, you would have made a 50% profit, never mind the rental income. But if you had bought a year ago and sold today you would have made exactly zero.

The California boom is over and investors need to switch to Plan B, which is the answer to the Jeopardy question: How do you deal with a market that at best will be moving sideways, but could also drop 20%?

The end of the boom in California also poses troubling questions for investments elsewhere in the country. Will other tech economies follow suit? What are the prospects for booming markets in Arizona, Nevada, Utah, Texas, and Florida? And will panic selling drive down prices everywhere, as it did in 2008, pushing an already weakened national economy into recession.

Is it just the Bay Area?

No, Southern California is right behind. Home prices in the LA basin were up 3% in the past year, but 9% the year before and the trend is clear. The LA economy is not as tightly tied to the tech sector but it has been weak, with job creation on the low side, even as home prices in the past five years surged 40%.

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