“I agree w/ kewp. That is the fundamental. When income support the price. Be it income triples to match current price or some kind of combination of falling price and income rise.”
Hehe, not bloody likely. As Rich says, wages are flat. My own personal experience is this is a stingy area for salaries especially, I only make a few grand more now than what I did when I moved here in ’99. And this is with a few job changes!
I wonder how many of these RE perma-bulls are business owners that pay their employees minimum wage? Amazing the amount of cognitive dissonance that goes on these days.
My serious opinion is that it will take three things to bring the market down (in order of importance).
1. Public Perception
RE is a shitty investment. Always has been. Once the public mindset shifts and everyone realizes they are either holding a white elephant, or thinking of buying one, will the prices really correct en masse’. Remember, its buyers that ultimately set the prices, not the sellers.
2. End of easy credit/easy fraud
Once the sub-prime market collapses I think indeed the market will correct itself, as the lenders are going to have a hard time convincing anyone to buy mortgage-backed securities. Heck, just enforcing the current standards would probably be enough.
Would be nice if the gubbmint regulated this area more, but we will probably have to wait until the Dem’s are back in power.
3. Foreclosures
Banks aren’t interested in holding properties and waiting for a rebound, so they are going to sell for whatever they can get. This should help return the market to equilibrium.
The most important point is as long as there are folks willing to buy property at the current prices (regardless of what loan product they use), they are going to stay where they are.
