Most people on this forum, (just going by the ones I met) are in the higher earnings category. So they could buy a home at $350K – $500K on a 30 year fixed. The only reason they are not buying now, is because prices are still a little too high.

If the median were at $450K (instead of $535K for a resale single family home), many people on this forum would be buying by now, I think.

So the lack of buyers has more to do with being priced out, rather than believing there is a housing bubble. I think many people here are not wanting to wait 5 years to buy, but that is how long it will take for this market to bottom out. Many people are actively looking at homes, and when the prices come down enough that they can buy with a 30 year fixed rate loan, they will buy. They won’t want to wait 5 years. Especially if they are a nesting couple, or there is a wife who really wants her own house.

This is just a guess, so I am interested in the feedback from lurkers/posters who have never bought a home. Are you renting because you cannot afford to buy now (or would need an exotic loan or 100% financing to buy now), or are you renting with the expectation that you will buy in 3-5 years when prices hit a bottom?

I am in the second group. But I think there are few with my plan.

There are so many people waiting in the wings, and they don’t really understand the bubble, or they read this stuff and think it can’t really happen, or they will be happy to buy a house at $400K and not worry if it falls to $250K later. They so badly want a house, that they don’t care if they end up upside down on a mortgage.

However, by the time the spring rebound doesn’t materialize, the reverse psychology will set in, and then people will be afraid to buy, worried that prices can fall even lower. We’re just not there yet. Most of the people I speak with believe prices will turn up again in the spring, or next year sometime,because in California prices go up in the long run.

When I ask, “Don’t you rememher the last downturn, and that prices dropped up to 30%”? The answer is, “Yes, they dropped 30% but they went so much higher. Prices will drop now for 1-2 years but then they will go much higher. It always happens that way in California”.

So the perception is that even if prices drop, they will soon enough go up, and go up much higher than our recent peak. So some people will just ride out this temporary downturn, hoping their house will just grow to the sun…