I think this buying behavior, and some of the comments posted on it, are indicative of what I like to think of as the second wave: First we had people buying because prices were going up. Now we have people whose psychology, whose frame of reference is still of the prices having gone up, and they see the recent price declines as indicative of it being a good time to buy. “Foreclosure” is associated with “bargain” in many people’s minds.

Never mind that prices will in all likelihood continue to drop for quite some time. I initially contemplated investing in foreclosure properties, then realized after about a minute of thinking about it, that the inventory risk was horrendous.

Many seasoned professionals have been burned by jumping in too early. It’s called “catching a falling knife”.