[quote=peterb]Prices move through the RE market slowly compared to most other markets. Foreclosures will turn into rentals as more investors purchase them and knife-catchers move into the market to own at these new and appealing prices. This should drive down rental prices as historically happens in most recessions and all depressions.
CA real unemployment is probably around 10% and rising. There already is deflation in most every asset class.
The only caveat on rentals I would have is that there may be more pressure on areas that are highly desirable for a while, as renting has more options than purchasing.
Forecasting involves identifying trends that are not reversing and following them to their conclusion or reversal. Just looking at today’s environment for rentals and not following out the progression of all these events is rather foolish and typically how we get into the problems like we are now seeing.[/quote]
Again, I think we are talking past each other on this. I agree with you long term. But economic strategy (fiscal, monetary, or investment) is all about timing. I don’t mean trying to time the bottom but in being able to accurately say where one is at now. Right now, we are in situation where we have noticeably fewer buyers than properties. However, we have (in some micromarkets) more people than available space.
In those areas, it seems unlikely that buying with lower carrying costs than rent (for owner occupied) is particularly suicidal. Housing has an intrinsic value that other measures of wealth (even commodities) do not. Would you disagree?
