kaitainen wrote:
fair points, californian. as long as you are not in the real-estate-prices-can't-fall camp, which, from your posts, it is clear that you are not, we're basically on the same page. 10% drop, 25% drop, in either case, some good people who drank the kool-aid are going to get hurt.
the sad thing is it will be the buyers who can least afford to get hurt that do. the ones who shouldn't have even qualified for a mortgage, and definitely shouldn't have been encouraged to use an interest-only or a "negative amortization" loan.
my biggest beef in the real estate arena is how many in the mainstream media write articles that basically say you can never go wrong buying real estate. some basic number crunching, taking into account the opportunity cost of tying up your money in a stagnant asset and taking into account transaction costs, will demonstrate that in the 3-5 year time frame, you will only be in a better position financially as a result of owning if prices go up a fair amount, probably around 3% per year (assuming today's rents vs. home prices).
Bingo. The average dude looks at RE the same way they looked at day trading stocks during the mid-90s. It seems so easy, that they get in and drive up prices past a point that is reasonable given the neighborhoods and financing in order to "flip" it.