I remember the peak of the last RE boom to be 1989. In 1990, builders started shaving 20% off of prices but the median went up. It felt very painful because like-for-like house dropped about 30% in many case from 1989-1992. The median held because people were spending the same amount but they were getting a lot more for their money.
My guess is that owners had the wherewithal to hang-on for a few years but when the recovery did not materialize, they gave up. That’s why the median didn’t drop meaningfully until 1993.
In order to get the best deal, you have to wait until owners “give up.” The psychology now is that we are “taking a breather but prices have nowhere to go but up.” I don’t expect the psychology to turn decidedly negative until 2010.
One of my idiot friends just bought a Downtown LA condo, even though his DC condo is vacant. We’ll see how long it takes him to regret his decision. He can rent-out and hang-on to the DC condo but it will bleed him dry for years. Not fun.
