It is not a question of whether the market will go down, it is how far down will it go and how long will the cycle last. Basically you should advise your friend to take a few different looks at what scenarios may occur. One possible case scenario would be a 30-40% decline over the next 4 years. Then a slow recovery in the 3-4% per year growth rate. Alternative approaches may be a lesser decline of maybe 6% a year for a few years.
Nobody here can answer with any degree of accuracy the questions your friend is asking. However you can advise your friend to chart out a few different case scenarios over the next several years.
I would speculate (and it is only my opinion) that the market will go down, it will take a few years until it bottoms out, and then it will be a flat market for awhile, then it will appreciate slowly.
All results and speculations can be radically affected by interest rates, global events, how our economic policy will deal with the day of reckoning when we decide to really deal with the deficit and value of the dollar…. Unfortunately none of those factors will help the housing market.
I don’t mean to be to bearish but if your friend thinks hey I will stick it out another year or two and things will bottom out and get better quickly… then I think your friend is wrong. I will say there “may” be a small rally in the spring of 08 and maybe 09. So my advice would be, if your friend is risk averse, is to get out now. Otherwise make sure that stick it out means stick it out for several years, not just 2 or 3.
