The U.S. housing market is in a spot much like a roller coaster that is nearing the top of the peak, is the way I see it. As the ride crawls to the top the coaster almost appears to come to a stop. Then the real fun begins. Hold on folks and keep your arms and legs inside the vehicle. Home prices haven’t fizzled yet, but that doesn’t mean that real estate is the first bubble that fails to burst. All bubbles burst. 100% of the time. Let’s be clear, there are no exceptions.

For a bubble to burst, prices must fall. And the bursts must start somewhere. Continued sales weakness is baked into the cake. Orange County California has enjoyed a decade plus of gains from December 1996 to January 2007. That 122 month period spiked the Orange County median selling price by 213 percent, according to the Orange County Register. Orange County’s median home price fell on a year over year basis in February for the first time since 2012. The mid-point in Orange County’s price for all residences sold in February was $700,000, down 1.4 percent compared with a year earlier. Sales rose in only 20 of 83 Orange County zip codes, according to CoreLogic.

While this drop is so small as to be meaningless in practical terms and possibly anomalous in statistical ones, it snaps a seven-year trend of constant price growth in this metric. While prices went up in San Francisco by 5.3 percent year-over-year to $1.38 million on average, Marin County and Santa Clara County median prices dropped during the same period by 4.7 percent to $1.08 million and ten percent to $1.08 million, respectively.

Home prices increased 4 times faster than Los Angeles and Orange County wages from the summer of 2011 through the summer of 2018. While incomes rose 17 percent in LA County, home prices increased 73 percent, according to the Orange County Register. By comparison, and from the same source, U.S. wages increased 15 percent, while house prices rose 45 percent. Something has to give.

Nationally home prices still rose 6.9 percent in April year-over-year. But that’s the lowest price growth in five years. The latest data shows 1 in 5 metropolitan areas is now seeing decreases in home prices, compared with half as many a year ago, reports realtor.com. Whether you call it a housing slowdown or a softening, it’s real and it’s here. Here’s the list of the 10 cities getting hit the hardest from realtor.com, May 20, 2019:

1. San Jose, CA
Median list price: $1.1 million
Median list price change: -8.4%

2. Oxnard, CA
Median list price: $681,100
Median list price change: -5.4%

3. College Station, TX
Median list price: $265,000
Median list price change: -5.4%

4. Bridgeport, CT (Fairfield County)
Median list price, $750,000
Median list price change: -4.9%

5. San Francisco, CA
Median list price: $948,300
Median list price change: -4.1%

6. Hilo, HI
Median list price:$481,600
Median list price change: -3.5%

7. Cape Coral, FL
Median list price: $30,000
Median list price change: -3.3%

8. Laredo, TX
Median list price: $180,100
Median list price change: -2.9%

9. Huntington, WV
Median list price: $143,300
Median list price change: -2.3%

10. Iowa City, IA
Median list price: $275,000
Median list price change: -1.8%

There is only one country in world history that has increased by 76 million people. You know the group as the Baby Boomers, born between 1946-1964. Please notice some were legitimate while others were illegitimate. Some were legal and others were illegal. The point isn’t about how the group showed up, the point is that a huge number of people came into the U.S. To accommodate all of that demand for housing it is logical that prices could get to levels that no one imagined. With 10,000 people a day turning 65 it is now noteworthy that the average age of selling homes in America is 79, according to Dent Research & the U.S. Census Bureau. Boomers in 2019 range between 55-73. It took 20 years for Boomers to buy their McMansions, from 1980-2000 (source: Dent Research) so it is reasonable that it will take another 20 years for them to sell what they love, but cannot take with them to heaven. At some point supply and demand matter. If 25 percent of the population goes to heaven and 130 years of inventory are left on what we all hope to remain this beautiful green thing we call Earth, when demand goes south and inventory remains the same, it is clear to this observer prices only have one way to go.

Huntington, WV, for example, is a struggling metro badly affected by the opioid crisis. Many people are leaving the city on the Ohio River for better opportunities. That means there aren’t exactly a lot of people clamoring to buy real estate, which keeps prices down. Now imagine what prices will do in the country where 76 million people that came out of nowhere disappear. Forever. Sing along with Paul Simon’s classic, One man’s ceiling is another man’s floor.

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