I agree. But I don't think prices will "correct". They'll plateau and
stagnate, but not fall significantly.

That depends tremendously on location.

... Demand is increasing
exponentially
with the baby boom population retiring.

Ya think? Seems to me that more people are downsizing as they retire.


A real estate bust is not like a stock market crash. Any corrections will
not happen overnight, but they will occur. A very general scenario,
right now, your market is overheated, they are building like crazy,
everybody is getting fat, and the market will never go down. But watch,
you see a couple of buildings completed, usually a retail unit, with no
occupants. Same with a house, here or there, completed with no one moving
in. Six months later, it's bust. The switch has been thrown, and there
will be no new starts. The well financed builders will complete their
projects and hope for the best, the less well financed will leave theirs
incomplete. Now comes the corrections.

And this also *can* (not necessarily) lead to a steep drop in ask
prices. It will certainly lead to a steep drop in realized prices.




The prices will remain high, because no one is willing to sell for less
than they paid, but those that thought they were going to get rich,
leveraged to the max, can't make the payments, will either walk or declare
bankruptcy.

And those houses go on the block for whatever they will fetch, which
drags down other ask prices.

It's also quite possible for local conditions to change (perception of
schools, for example... or traffic & road conditions) such that an area
becomes much less desirable, and prices drop. Sometimes it's more of a
long term lag, sometimes it's falling off a cliff as the number of homes
for sale in the area increase and buyers aren't coming.

... Those that have to leave the area, for whatever reason, will
have to take the hit. That's the bottom. Then there are those, such as
yourself, who bought a house to live in, they'll ride it out.


NOYB wrote:
Excellent synopsis. So the only thing that will drive prices down will be
those folks who *must* sell because they can't afford the payment on an
investment that they can't rent out.

Excuse me? Was that written between the lines somewhere? In any event,
it's quite wrong.


... That is precisely why DSK's idea of
rental properties makes less sense than dumping all the money into your
primary residence.

What was my idea about rental properties?


... When you live in the house, you can afford to ride it
out.


Not necessarily. And you're overlooking a very key fact- if your
appreciation doesn't dramatically outpace your loan (which could easily
given any of the above scenarios), your home performs extremely poorly
as an investment.

DSK