Powayseller – I think Steve Beebo has a great comment here:
“Real estate prices always boil down to supply vs. demand”
This is really the crux of the matter. Analyzing charts and trends and ratios of price to income is too far removed from the actual market. Don’t analyze the bottom line, analyze the factors that go into the bottom line and you’ll have a better feeling for what will happen.
May I suggest an analysis that predicts supply and demand by answering the question – “How many houses need to be panic sold in the next 3 to 7 years?” Is is 10? 10,000? 100,000? I don’t know, but I think that answer could help
The demand side may surprise you and others predicing ultimate doom – unlike me, who is predicting your basic doom. There are quite a few people who made lots of money in this boom. That money is sitting around in cash. You sold a house in 2005. You have cash. I sold a house in 2005. I have cash. In fact, if you look at all the sales recorded in 2004 and 2005, you start to realize that for every suicide loan, there is someone with a small truckload of cash – each of whom is a potential buyer in the coming down cycle, even if interest rates are high.
Figure out how many buyers will be out there, and how many houses will be for sale and that will tell you where the price will settle, not the price trend itself.
