We are in Deer Valley for a weekend ski trip with our friends. We are staying at a massive ski chalet - over 6,000 sq ft of pine and stone and vaulted ceilings - and naturally, I’m stalking the place. The owners paid $2.5 million in 2013. It’s now worth triple that.

 

Lori used to come here as a kid, and it was a quaint cowboy ski village. Not anymore. Deer Valley has gone the way of Aspen and Jackson Hole - fancy, and stupid expensive and only getting stupider.

 

The dream would be, of course, to “buy in the dip” here, but there’s no dip coming. Yes, when recessions hit, second-home communities crater. Most vacation homes (Big Bear, Palm Springs, etc.) are huge and underutilized expenses for their owners, so they cut them loose at the first sign of trouble. Prices drop.

 

But not here. The 2034 Winter Olympics are coming, and it’s all rich people here. They don’t do recessions.

 

But I’ve noticed something interesting back in LA: there might finally be some price cooling.

 

The numbers show an upward trend, but there are signs to the contrary.

But there’s additional anecdotal evidence. 

 

For the first time in years, we’ve started to meet with Sellers and have had to give them the grave news: “This is worth less than you paid for it.”

 

Mostly, these are COVID-era sales. Homes were selling for huge numbers during that time: it was easy to lose your mind when money was flowing, rates were 2%, and the house had 40 offers.

 

There’s also chatter among real estate agents. We host a monthly mastermind meeting with top agents at our office, and much of the discussion this week centered around houses sitting on the market with no offers (mostly priced above $2/2.5 million). 

 

It seems, for the first time in a while, a handful of homeowners are now underwater. Does that mean owners are selling at a loss? No. No one has to sell; people only sell at a loss when they have no other options. Does that mean home values are generally “going down?” No.

But perhaps all this chatter and these recent meetings are a sign of things to come…

 

Look, markets have cycles. “Trees don’t grow to the sky” is the German proverb oft-repeated by stock market writers.

 

There are three kinds of market crashes: corrections, bear markets, and collapses. 

 

A correction is a 10% dip. This is what’s happening with the stock market now. Perhaps the housing market for certain types of homes? 

 

A bear market is a sustained pricing winter, generally when prices drop by 20% or more over a sustained period.

 

A collapse is what happened in 2008 - never happened before; won’t happen again.

 

Would-be home buyers claim they would love a market correction/collapse. But, in my experience, sentiment changes and the market freezes.

 

I had front-row seats when the market crashed in 2008. People who wanted to buy couldn’t get a loan. And the ones who could buy didn’t. Why? Because they thought prices would go lower!

 

I don’t worry about market corrections or crashes of any kind. That’s the benefit of buying and holding - any market graph, if you step away far enough and squint, is a straight 45-degree line.

 

My clients and friends who walked away from their properties in 2008 because their homes were worth $400k less than what they had paid now look at Redfin with a pit in their stomachs, confronted with the millions of dollars in lost appreciation over the last two decades. Straight. 45-degree. Line.

 

We are often asked if politics are affecting the housing market. Not so far, although I’m pretty sure more inflation is coming, which is not good for rates but good for values. Housing almost always goes up with inflation, which is why they call it a “hedge” against inflation.

 

Where’s the “proportunity,” as Lori says, these days? Buy where no one wants to buy. Fire zones. Laurel Canyon has some great houses sitting right now.

 

Personally, I’d absolutely buy in an area that has burned down, but I’d never buy in an area that has burned down twice.

Until next week,