Dacounselor, this is where we disagree: I don’t believe we will see another real estate bubble like this in our lifetime. It will take decades to regain today’s prices, in my opinion. This is a once-in-a-lifetime opportunity to cash out, just as NASDAQ was in 1999.
In your lifetime, it is more likely that your homes will never recover to the peak prices, than it is that they will go back to it, or exceed it.
As I mentioned, many people say that real estate in CA always goes up and down, but each up cycle brings us higher than the previous cycle. That game is up.
The reason that prices cannot go higher is because the money to go so high came from export countries like China, Saudi Arabia, Singapore, Japan, that invested their surplus dollars into mortgages. They are losing interest in buying US assets. Americans’ highest productivity years are over, so we will not create another big boom on our own.
But if you think that the next up cycle will bring $ 1 million median homes, then you need to answer from where will come the money to fund these homes? High inflation leading to high wages (but then you’re not gaining anything in real terms). The Chinese are going to buy trillions in US mortgages (very unlikely). Where then?
I do thank you for your input on depreciation and tax deductions, and this may come in handy for me in 2010-2012, if I decide to buy real estate at that time. But I may decide that real estate in the US has a dismal fate, like that of Japan, and I can employ my capital better elsewhere.
People think there is such a thing as a high risk-free return. There is no such thing. So I think that people like you, who think that real estate buy and hold is the answer to riches, will be sorely disappointed, just like the buy and hold stock investors were left with empty pockets when all was said and done in 2001. Real estate’s glory days are gone for the next 5-10 years, maybe for the next 2 decades. I have no clue how long the downturn will be. Maybe it will be like Japan, where we go down for 15 years and then just flatten out.
