Too many people will not have the luxury of waiting this cycle out, as homeowners did in the early nineties. We are going to see a growing number of banks and homeowners that will have to sell, adding more to inventory, forcing prices downward, and spooking out potential buyers.
My opinion is that we see an accelerated downturn in prices towards the end of this year, bottoming out (getting to rational fundamental prices) by the end of 2008, and then hanging out on that bottom for 5 or 6 years. I don’t think we will see todays prices for at least 10 years, unless wages and inflation rise significantly.
It hasn’t gotten bad yet, there are still people who think that homes are really worth what they’re selling for in SD. There are people who think now is a good time to buy before prices start going up again. The psychology hasn’t shifted yet, when it does, it will be ugly. How many of us remember what it was like in the early-mid 90’s? The last thing anyone wanted to do then was buy a home.
