Anyone buying right now is basing the purchase on recent historical reference and not looking forward. In other words, they’re buying because it seems so cheap compared to the last 3 years of pricing. Rather than asking themselves, “Where and when will appreciation begin again?” This has all the signs of a false rally. With every step down, some money comes in that thinks it’s cheap, but they’re not asking themselves “What will cause it to rise again?”. There’s virtually no news for the next couple of years that indicates a rise in prices and almost everything points to further declines. The best long term historical references we have suggests that the median price should stabilize at 3 to 5 times median HH income. And at these levels, investors can also see rents being able to cash flow slightly positive. In my opinion, that’s where prices have to get in order to stabilize. And it still does not mean they will rise anytime soon after stabilization has been reached. Long term historical evidence suggests that rising prices almost always are preceded by unemployment below 5%. Who knows how long that will take????!!!
