To me, one of the characteristics of the bottom is “low prices and high interest rates.” High rates can force the market down a bit near the bottom, but if prices are low enough, a turn-around can start in the midst of high rates.
If rates are high, the general public will avoid real estate due to the big payment caused by interest rates, but investors will start to realize that the price is low and a higher rate loan can be refinanced later. They’ll use the leverage to get into low priced assets and this will start the turn-around.
Seems to me that deflation is winning the battle out there and this high-rate scenario is a year or three off, but I think it has to happen eventually.
Of course, maybe this is the start of our lost decade and the Fed rate will be at 0% until 2018. Mortgage rates don’t necessarily drop when the Fed rate is low either, so who knows. I just hope my project stays funded for the next 12 months so I can save cash for those opportunities.
