[quote=ralphfurley][quote=SDEngineer]Even if the downside is still significant, there is VERY good reason to believe that prices will rebound back to the trendline relatively quickly (certainly within 5 years I’d say).[/quote]
I’m not trying to be a jerk here, but what reason is that?

This housing downturn seems worse than the one in ’89 (or did it peak there and go down a year or two later?). Anyway, housing didn’t go up much until ’98 or so.

If things are worse this time around, what makes you think the housing market will rebound in five years or so?[/quote]

I’m speaking primarily of the submarkets that people are currently buying in that have already seen a ton of depreciation (San Marcos, Mira Mesa, East country). BTW, I’m NOT predicting any sort of returns to the bubble highs – I think those numbers are at least 10-15 years off. I’m speaking mostly of any overshoot on the downward side, and a return to price/rent longterm ratios (ratios which have been relatively stable since the 40’s).

Why? Because when the price of a house drops significantly below the price to rent, the smart investors (the ones who primarily sat out this bubble, and always buy during lows – experienced long term RE investors) start buying units to rent out. That’s what happened in all the previous bubbles. This may have been a record setting bubble, but there is still a floor that will be set by rents – the investors will see to that.

The economic downturn might push rents a bit lower, but the economy will rebound at some point, and rents will at that point return to their long term trends, which, ultimately, is what supports housing prices.