I agree that a little blood will be extracted from flippers, just enough to keep most of ’em away for a few years. But buying an asset worth $1/2 million to several $million with just a few % of your own money at risk will always bring people back, since it’s a way to go from near-poverty to riches, and the worst that can happen is you go from poverty to poverty. If you’re dishonest and belligerent, then you don’t even have to go into poverty. I know people earning good incomes and with some savings who made their banks accept a lousy payoff in the last downturn, and they walked away free and clear. Now they own million-dollar homes they bought dirt-cheap right after. As long as lenders are dumb enough to allow this, it will continue.
JWM,
The scenario you describe as D. is what I was trying to express under A. In that scenario, prices go down with no government bailout and mortgage lenders take a big hit. At some point, if prices drop a lot, then even the homeowners who bought 10 years ago will get restless and call their congressman, and then B and/or C start to kick in.
