Thus the value of the discussion. Forums like this remind me that perhaps only a few households make decisions in the manner I think is rational in today’s environment.
I.e. when times are good, everyone spends money, when times are bad, people cut back. Ideally, more would do the opposite to even out cyclical movements in the economy and create more balance.
So it’s really a shame that frugal behavior isn’t more widespread. Or that more stretched households don’t pay down debt when times are good.
If there is a downturn, a shift in consumption patterns may provide a buffer for those willing to make moderately tough choices.
So back to the premise, if the majority are not frugal today, frugal behavior may not be driving prices higher but if there is a slowdown, switching to a more economical consumption pattern may help mitigate against a downturn (assuming of course employment levels aren’t seriously affected).
On balance, I think that the rapid rise in real estate prices would be a strong incentive to not have to be forced to sell in a future downturn (whether by short sale or foreclosure).
I’d like to think that after the pattern of the last ten years, that new buyers would do “whatever it takes” to not lose their now larger down payments. Because there could be a strong recovery again and it would be hard to get back in.
