@manch, as I posted in another thread, in Sunnyvale a 10% correction has already happened.
We had this house for sale:
We finished construction in November, but did not want to list at that time. We thought we would get more money in February, because that’s the traditional buying season. Also, the weather wasn’t great (rain) for open house traffic etc.
We intentionally delayed finalizing the permit until January, so that it would show as a “2016 house” instead of “2015 house”
In November, this house would have sold for $2150k - $2200k. I can easily show you 3 comps from that time that support this number.
We listed around February 1st asking $1999k. We got 1 offer within 12 hours at $2050k. We had the $2150+ expectation, so we waited a few days. We never got a second offer. Lots of traffic to the open house, no offer. The poor buyer never got a counter to his 2050. He came up then to 2100. At that point, I would have sold, but my business partner refused.
We changed agents then. This is now the best time of the year, mind you. We concluded that listing low and waiting for multiple offers does not work in this price segment, so we listed for what we wanted to sell for … $2200k.
Hindsight… 20/20… yes… sure, we got no offers with that asking price. Dropped back to 1995, I forgot… I think we got some offers there, but not over 2000. Dropped the price to 1835… got maybe 5 offers then, 2 of them were 1900. One buyer had $3.5m in his checking account but was not willing to go to 1950. They had been looking to buy for a few months but were not willing to come up higher. This should tell you something.
Then we changed asking price to 1950 and sold for 1980.
The 1980 is in line with sales for spring 2016. So, there’s roughly a 200k drop from November.
And there is a change in buyer attitude. I have had houses that had challenges. Busy road. Ugly neighbor (house). 7/11 across the street. Too many people of race XYZ (yeah, that happens!). This particular house had no such challenges. And people would be picky because of a laundry salon 2 blocks away?
Buyers were more picky and less willing to bid over asking price in spring 2016.
To answer your question, I don’t think it is a bubble bursting. So, we had a 10% correction. This could be reversed at a similar speed (I have nothing listed there right now). I don’t think it will go down another 10% immediately, but it is an unlikely possibility for the next 12 months.
My expectation is that prices will stay flat for the next 12 months.