PS – Thanks for the invitation. I have no strong opinion regarding where housing is going either way. When I do, when I have the certainty of my convictions and I observe that a new trend has been established, I will then act upon it vigorously.

However, my WAG (wild ass guess), based on past experience and current data, is that housing sales will continue to slow, interest rates will continue to rise (slowly) and a few selected markets will suffer more than others (downtown San Diego and outlying areas like Escondido, in particular). How much? I have absolutely no clue.

I do not believe we will see massive drops in values (especially in the coastal zones) nor do I believe that people should sell their homes in anticipation of that happening. I see absolutely no desperation in listings in my area (homes are selling as usual in Carmel Valley and no one seems to be worried about a “market crash”).

I believe that the increases in inventory are due to several factors, one of which are last ditch attempts by late party arrivals to maximize profits at what they believe are market tops (a move propelled by greed, not fear or desperation or a belief that the market is crashing). I also believe, that when their homes don’t sell at their inflated prices, the majority of them will simply pull their houses off the market and stay put.

I believe a lot of people are fishing, in hopes of catching the big one but now, the big fish just aren’t biting. So, they will do what any fisherman does, pack up and go home.

I believe there is going to be some pain felt by those who took out adjustable rate mortgages in the last year or so. But will it cause massive foreclosures, bankruptcies and an erosion in the economy like one we have never seen? No. I do not believe that by any stretch of the imagination.

I believe that if things get really bad that lenders will come up with ways to alleviate the pain and mortgages will be recast to prevent foreclosures on a massive scale. The last thing lenders want are REOs. Having said that, I do not believe that will be necessary.

I believe that when most everyone is anticipating a collapse, just by virtue of that awareness, it won’t happen. Bubbles burst by surprise, like the stock market did in 2000. A lot of folks were caught off guard then because they believed values would continue rising and greed clouded their judgement.

Do the majority of people in American believe that residnetial real estate will continue raging higher? In my experience, absolutely not. Some are still buying on speculation but their numbers are insignificant. After hearing about a bubble for several years, the buzz is now about how the real estate party is over and everyone knows it.

Over the last few weeks, I have actually asked several of my friends and neighbors this question: “If values fell 50% over the next five years, what would you do?” “Nothing” was the common response. There is no fear in my neck of the woods.

Everyone I know is here for the long run (at least until their children have finsihed high school, which in many cases could be ten years or more) and not one of them is depending on their home for retirement. Not a one.

So, here’s what I believe, bottom line: The party’s over. Most folks will now go home and simply stay there until they get invited to another party, which may not be for a while. Some folks arrived too late and stayed too long at the party and will suffer the consequences in the form of a financial hangover. Others simply left too early and missed a heck of a lot of fun. The party was pretty wild and some folks left out of fear. Some folks missed the party altogether and are very upset by hearing about what a great party it was…