Here is my prediction, based on gut feeling.
Summer 2006: people start to see the market go down, get concerned, put their house on the market. We get a huge inventory, properties don’t move, prices go down.
Fall 2006: the desperate ones leave their property on the market to get out, we see start of price reduction, but they are “sticky” on the way down, because the desperate owners need to cover their mortgage balance. The other seller pull their property out, thinking they have a better chance when the market picks up again in the Spring. Why not, they hear in the media that the price will flatten out soon, and go back up in few months.
Winter 2006-07: the market will still be full of desperate homes trying to get sold, and those sellers will get more desperate, and will finally see that they have to lower their price to sell their property.
Spring 2007: in addition to the remaining desperate felt-over, the “natural” inventory is coming on the market. We will see huge selling inventories, and this will continue to drive prices down.
Summer 07: everybody knows the market sucks, the media will be over it, and the owners with adjustable ARM will get scared and try to cut their loss: more inventory:
Fall-Winter 07: historical high inventory on the market, historical high foreclosure rates, floor has fallen below the market prices.
Spring 08: we hit bottom. Nobody wants to buy real estate. This is the opportunity to get cheap houses for savvy investors who want to buy for the long-term. Prices are flat at the bottom
I think prices will be flat in 2009, and start to go back up in 2010. And then we can start a new bubble. By then, we will have a new “crop” of young buyers.
In 2015, the media will say “real estate never goes down”. It will be time to get out of it again, unless you are ready to ride the next bubble.
All of the above is just my gut feeling, and knowing a bit how the human psyche works.
