Remember that when a home is taken off the market, it sits empty. That home will become inventory at some future point. Investors, wealthy as they maybe, can only endure negative cash flows for so long.
Interesting point to note is that the stock market is in a rally because the big cap are globalized companies. The world economy is now doing much better than America. I expect this real estate downturn to last 10 years.
Think about it this way: if wealthy investors think that the downturn will last 6 years and have enough wherewithal to last that long; but the RE slump hangs in there, they might give up in year 7 or year 8. So, with cash in hand, you can find killer deals then.
Right now, the general thinking is that RE will appreciate again in 2009. If it doesn’t happen, you’ll see a lot of people starting to give up in the fall/winter of 2009. That will feed on it itself just like it did when prices were going up.
