zk, I’ve been called a dumbass and idiot on this forum for my predictions, too. Maybe they’ll call me a genius next year ?? 🙂 Both you and Bugs have talked about buyer psychology, and I didn’t understand the importance of it, until I started my latest book, Irrational Exuberance by Robert Shiller. Psychology starts bubbles, and psychology pops them. Once psychology shifts, not even lower interest rates will increase sales.
Eric at iTulip describes it so well. On the way down, houses go on the market and fewer people show up to look. That’s because earlier buyers bought on the expectation of rising prices NOT because they needed a place to live. As in the example you cited, the people didn’t want to buy now that they were first on the list, so they opted out. Since they sense there won’t be a future buyer in line to purchase that house from that, they stay home, so to speak.
Once housing transactions fall, this creates fear and loathing about prices. Eventually you get long periods of time with no transactions, like barnaby33 who told me of a house that had NO lookers for one year in the last bust. This happened in Japan, and prices nationally are still more than 60% below peak prices of 1992, although interest rates were 0%. So you have an actual example that not even FREE loans could entice buyers back in, once the psychology shifted.
Once the foreclosures start and prices start falling, the psychology will pick up momentum. Could we go to sales of 10,000 per year or less? Last year we were at 40,000, and this year it is probably 30,000.
