Preparing for a real estate downturn

(This is Part 1 of a two-part series. See Part 2: Survival tips for a down real estate market.) The debate about the real estate bubble wages on – will it burst? Will it be more like a soufflé that collapses when the air is let out? Will the market simply level off and hold steady? Regardless of what happens in your market, being prepared for market shifts will keep your earnings strong while others are struggling. At Real Estate Connect in July, the consensus seemed to be that we are probably shifting from a red-hot seller's market in most places to a more normal market. Most experts expect to see a general slide into a slower market. This is also known as a "soft landing." Others believe the bubble is about to burst. Real estate, like the stock market, is cyclical. According to Dave Lindorff of Kiplinger's Personal Finance magazine, the high-flying California markets in Los Angeles, Sacramento and San Francisco have a 40 percent risk of decline over the next two years. Bo...