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My fears about the Real Estate Bubble
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The following describes my feelings and fears about the current Real Estate Bubble, from a Santa Cruz perspective.
I personally am not worried that the price of the house that I live in would fall. If it falls, ok, I was not going to sell anyway. I will save on property tax. If it does not fall, I'll end up paying more property tax.
Instead I am worried what happens when unemployment goes up. Spending goes back. Lots of bankruptcies, inspite of the new law that makes personal bankrupcties more difficult.
So many people employed in Real Estate related jobs, what are they going to do in 2009, 2010?
Will they all become counselors for the depressed population?
Some people who have not bought in the time between 2001 and 2004 and instead saved up money may then be able to afford a home at a more reasonable price. But it will not be a positive climate to live in.
What is happening lately:
I was in Santa Cruz last week again and noticed that the downtown area has more closed-down shops than ever before. It is a sad thing. Kepler's in Menlo Park had to close down. A spiritual bookshop (Gateways) in Santa Cruz had to downsize first (smaller shop), now they had to leave downtown completely. Several restaurants went out of business this summer. People are spending less. Some longtime places like an independent art / framing shop got replaced by fastfood chains (Baja Fresh in that example).
Commercial rents have to come down, but that won't make people spend their money. I don't know where those fairy tale statistics about improved consumer confidence come from; I do not see it here.
My biggest fear for the next 5 to 10 years:
The happy weird city of Santa Cruz turns into something like Fresno or Fremont. The T-shirt "Keep Santa Cruz Weird" will be obselete.