This assumes a normal market. With the current market, anything bought from say 2003-2008 (or refi’d during that period) becomes a short sale if prices drop even a bit from the spring madness. Yeah, yeah, but they won’t sell … people move, loan mods typically lower payments, but you still owe the original principal upon sale, and not everyone wants to be a landlord (if the loan mod even allows non-primary use).
External force: Look at the effect that the end of the $8k housing credit in 2010 had on SD prices and consider that a rise in rates from 3.25% to 4.5+% has MORE than that effect as far as monthly nut.
I don’t think the market will tank to 2011 prices, but prices not too far off from fall/winter 2012 prices are quite plausible, followed by a gradual (though maybe spiky) rise in the future.
The past five years seem to have been marked by a few periods of frenzy and a few periods of extreme slowness. I don’t see why this whipsawing should not continue.
