Let’s see if I can tackle this one.
Buyer buys home he can’t afford with a suicide option arm loan. He crossing he fingers that the house appreciates enough so he can sell or refi into a fixed loan. Prices don’t go up enough to cover the 6% sales comm, and since the buyer does not want to lose ANY money, he holds on to it. More and more unoccupied properties go on the market. Prices start going down slowly. The monster can no longer be fed with GFs. False bottom under peak pricing. Prices head back to 2001~2002 where average income buyers can actually afford the home with a fixed 10 to 20% down.
It’s amazing how emotions can be included for reasons that home prices go up, but logic, charts, and math equations are the only factors that can be used to determine how low home prices can be taken down. There was a huge overshoot on the way up, and there will be a huge undershoot on the way down. Wait for the clearance special soon. Don’t forget to bring the “Take an EXTRA 10% off” coupon that comes with your morning newspaper a couple of years from now.