If there is a very rapid decline in home prices, a panic is likely to set in sending the prices even lower.
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Pure B.S.! People need housing. the speculative real estate market is icing on the cake. A home has intrinsic value and is only worth what someone will pay for it. Speculation during market fluctuations always occurs, but that doesn't control price, supply and demand does. In point of fact, the supply of housing projected for the next ten years will be way below the demand for adequate housing. Katrina alone insured that demand will exceed supply for the near future. I'm sorry, I have just lived through too many of these cycles to act like the sky is falling every time the market corrects. I'm so sick of newspapers and TV trying to attract viewers by scaring us half to death about every aspect of our daily lives. After awhile you realize its just another fairy tale......the boy who cried wolf!
What has happened over the past half dozen years is very different than anything that's happened before...the zany mortgages, the globalization of debt, record low interest rates, really weird use of equity loans, etc. etc. etc.
In truth, nobody knows how this story ends.