Of course no one has the answer, but generally when assets bust after an extended boom, certain things must take place for the perception to shift. In real estate, the first caveat is that everything is local. Even Greenspan said that since there is no national real estate market, real estate cannot go down everywheres at the same time.
Well....it did! Housing has just had its first national decline in price.
Some general rules about busts
1.The markets that didnt participate will be the safest and may even increase as people see safety and reasonable prices in those markets.
2. Markets that participated the most in the boom, generally feel the most pain when the correction comes.
3. When people see this kind of large loss taking place, they will freeze and not buy unless they have to. So, even when things have stabilized we have to wait for peoples perceptions to change
4. Journalism has a lot to do with perception. Headlines will ride things up/down and emphasize the trend. When the headlines are no longer doom and gloom and begin to cautiously express a little hope, then the turn around is coming.
What Will it Take?
1. Time
2. Reform of the mortgage markets in the same ways that the S&L crises reformed banking
3. Lower Prices
4. A shift in the perception that real estate is probably a good bargain
5. Cheap money or low stable housing prices
6. A strong job market. The few markets still holding up are Portland and Seattle and I do think that is due to the strong job growth of the new 2.0 surge in Internet business's like active rain.
Thanks for Reading
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