[quote]I believe that the mentality of the buyers is still very much that when real estate picks up it will appreciate like it did before. That’s why people spend so much on housing. [/quote]

I haven’t seen much of a shift away from that yet and I’m still not certain that it is going to happen.

The “Your house is your best investment” mentality is pretty firmly ingrained even now amongst potential buyers. Besides, you get to mix emotion with alleged rationality when buying a home. It’s fun, exciting and satisfying searching for and buying your “dream” home and at the same time is (was) a great investment. You can’t say the same thing about a car or a stock or a bond. Paying too much for a car is just dumb. Overpaying for your dream home is shrewd given the locked in appreciation. Pay enough for it and you’ll get the satisfaction of explaining to your friends how you were able to adeptly out negotiate those other foolish buyers while at the same time covertly insinuating that your finances are so good that you can easily afford the overpriced, over-sized home.

Are those days long gone? I wish, but I don’t think they are gone yet. I still see it in the market though it’s essentially dominated by the “investor” crowd now. Maybe another 10-20% drop in prices or a very prolonged dead market will change attitudes. We’ll see. I’ll believe it when I see it.