That info from the realtors is very telling — basically there are few if any first time homebuyers using savings at all. Almost everyone has cash from a previous sale or another source; and it sounds like many are quite well-to-do. Based on this, I’ll estimate that things are going to deflate really slowly in the nicer neighborhoods. There will always be this sort of buyer that has a lot of cash from prior investments, inheritances, what have you. As they move around, trade up/down, they’ll be losing a little of their nest egg every time as the houses depreciate slightly year to year. There are probably enough of these sort of folks to buy a lot of the inventory in the good areas, but without first time homebuyers entering the market on the lower end, they’re not going to keep rising.
