Just down the road from Beverly Hills, Calif. is the enclave of Bel Air, which is just about as posh.
Even though a major recession has yet to hit, a swath of Bel Air real estate is already being offered at a big discount, which may be indicative of what’s ahead.
Here’s a Jan. 24 Bloomberg headline and subheadline:
Land in Bel-Air Hits Auction Block at 70% Discount. Bids Start at $39 Million.
It’s a ‘last shot’ to find a buyer for property that was listed in 2013 at $125 million.
If Elliott Wave International’s analysis of the economy is correct, there will be many more bargains in real estate – not only in the luxury sector or California, but across the country.
Here’s a quote from Robert Prechter’s Last Chance to Conquer the Crash:
The worst thing about real estate is its lack of liquidity during a bear market. At least in the stock market, when your shares are down 60% and you realize you’ve made a horrendous mistake, you can swiftly get out (unless you run a mutual fund, pension fund, insurance company or other institution with millions of shares, in which case, you’re stuck). With real estate, you can’t pick up the phone and sell. You need to find a buyer for your house in order to sell it. In a depression, buyers just go away. Mom and Pop move in with the kids, or the kids move in with Mom and Pop. People start living in their offices or moving their offices into their living quarters. Businesses close down. In time, there is a massive glut of real estate.
In the initial stages of a depression, sellers remain under an illusion about what their property is worth. They keep a high list price on their house, reflecting what it was worth at the peak. This stubbornness leads to a drop in sales volume. At some point, a few owners cave in and sell at lower prices. Then others are forced to drop their prices, too. What is the potential buyer’s psychology at that point? “Well, gee, property prices have been coming down. Why should I rush? I’ll wait till they come down further.” The further they come down, the more the buyer wants to wait.
… At the bottom, buy the home, office building or business facility of your dreams for ten cents or less per dollar of its peak value.