Market psychology absolutely has been the primary factor in the latest overexuberant runup. People were panicking thinking they’d never be able to buy a house again. Bill Gross from Pimco pegged this a while back. He said Japan had a 0-1% rate for ten years I believe and you know what? The price of housing still dropped. People who have taken out a large portion of their equity and bought second homes, Hummers etc. are stuck for life (or a very long time) unless they earn incredible sums of money.
Flat earnings anywhere cannot keep up with an overpriced market. Flippers are sweating big-time, realtors are being laid off or finding other jobs (I’ve hired a couple and some mortgage brokers)and we’re still at least 25% away from “reasonable” prices. You’re going to find a lot of “pissed off” buyers who had they waited 6 months to a year would have saved 40% off the house they bought.
