I am sure the pool of eligible buyers will shrink over time but no one knows to what degree because we are not sure how big the pool to start with. If there is a 10% reduction per year, then after 5 years, you may be able to get something you want. But if there is only a 1% reduction per year, you may still have to wait forever.
Reality is that there are lots of buyers (eligible or not) sitting on the sideline and wait to get a bite when they think the bottom is there or that they feel they can afford at the price range. I have a friend who has been waiting to buy a house for more than 10 years. They were very picky back then. When the market was low, they wanted to find the good one. When the market was high, they have no way to get in. Now that the market is coming down again and to my surprise, they finally got one in Scripps Ranch. They don’t want to wait anymore. I think emotion plays a major role in buying a house and people sometimes just want to buy even if they are not completely eligible. There are still loans that people at the borderline situation (in terms of eligibility) can get. Rationality will be overcome by emotion. It is interesting to look at this market.
