I’ll pose the counter to this. Some area’s now have home mortgages that rival rents with a 20% down fixed 30 year mortgage AND the replacement cost is probably 30% more than the sales cost. These are compelling arguements for those that have been waiting on the sidelines for many years now. “Pent-up demand” if you will.
To counter these facts, I would propose that prices are determined primarily by demand. Rents can go down as well as home prices if demand drops off. As for replacement costs…do we need more houses built anytime soon??!
BUT, I agree with you. The trend is just starting from what I can see. Unemployment is now gathering momentum at a historic pace. This will cause net migration out of CA as well as increased density in the rental market. In a credit based economy and a highly leveraged industry like RE, employment is everything. The debt must be sustainable or all bets are off. This recession is about a year old. Most run several years. Where will we be in 2011??
