Something else to consider, do you think someone that has spent a few years pinching pennies to save up a nice cash bundle will just toss it away on an obviously overpriced asset?
Exactly, kewp! The kind of folks that can scrimp and save a 100K bundle are the kind of folks that loooooove to see the interest compound — even in conservative 5% CDs, that’s a pile of dough. If you buy a house and use that as a down payment, you say goodbye to that free money — that’s fine when prices are going up (or expected to), but in the opposite environment, those thrifty savers are going to think carefully before parting with their nest egg…
Someone earlier mentioned raiding the 401K for a down payment — waaaay bad idea if home prices aren’t going up because you end up missing out on the tax-deferred appreciation of those assets. It *might* be okay in an environment where home prices are rapidly appreciating (if you have an exit strategy), but I don’t see it making sense otherwise.
