Why aren’t those big investment dollars in the Nasdaq now? As the NASDAQ fell, why didn’t all those investors plunge back in, to scoop up those good deals? After Lucent fell from $90 to $7, why wasn’t it bought back up? Instead, demand kept falling until it went down to $2.50.
The statement that large price drops bring in investors is not what history has shown. Price drops create fear. Eventually, price drops revert to the mean, are backed by fundamentals, and investors come back in.
Housing is the same. Once it really falls, people will be fearful of further drops, so demand slows further.
My guess is that once rentals are cash flow positive, investors will come back in and start buying. This will create more activity in the low end, making the median KEEP dropping. Those who are only looking at the median, won’t even know the buyers are back in the market for one or two years, since the median appears to be 1-2 years behind.
I think the low end picks up first, and then ripples up to the mid and high end homes. So once rent = cost of ownership, the investors will come back in and turn this thing around. That will be when price/income = 7.
Those of us tracking the market closely will be the first to know when buyers are back in the market, and can buy our houses then. I am ready to wait 5-7 years.
