That’s not how markets correct.
People were saying all sorts of “the market should correct to X level” after the end of 2000 and equities started selling off. They were mostly wrong.
Markets are most irrational at their tops and bottoms. They invariably become absurdly over and under valued at the extremes of market sentiment.
We’re no where close to a bottom on the real estate market(s) yet, ie, the market sentiment has not reached a negative enough level. When the “conventional wisdom” becomes “the smart people always rent their housing” and “only idiots buy real estate” - then we’ll be close to a bottom.
There is one more aspect of real estate markets that many people overlook: at some point, downturns in specific real estate markets become their own problem. When enough houses are sitting empty in a real estate development, crime rates go up, vandalism may start to become an issue and lenders become very nervous about writing mortgages in those neighborhoods, which further exacerbates the problem and forestalls recovery of prices.
Right - speculation puts the bottom somewhere in mid 2008. If you're buyin', you might consider timing your negotiation to coincide with this time frame.
What's interesting is that the Greenback (USD) will likely have already found its bottom before then and will have stabilized and risen significantly. Speaking of which, I'm curious as to what will happen to the Cable (USD/GBP) now that Britain has adopted the Euro, and what will happen to the Euro itself (and USD/EUR). Will printing more EUR to replace the Pound devalue it, or will the Euro's 'take over,' or acquisition (if you will) of Britain increase its value?
If anyone has thoughts on this I'd be happy to listen...
And people won’t move into a sea of vacant houses and end up the only folks in the neighborhood.
But one thing I’m also thinking is that sometimes a market change is permanent-—because it causes a viewpoint / mentality / lifestyle change.
For example, our fam got so p.o’ed at how Chirac handled France’s opposition to the Iraq war, that we stopped drinking French wine. Just our little way of stickin’ it to the man! But, guess what, this caused us to branch out into wines we’d never tried before. After a while, they completely took the place of what we’d been drinking before. Now, regardless of the “boycott,” even if we went back to French wine, we’d still be drinking a lot less than it before.
Here’s another example: when I was growing up, many folks (for whatever reason) traded in their car and got a new one quite frequently, some even every year. Over time, though, more and more people began to hang on to their cars for longer periods of time. When lightning (either social or financial in terms of car repairs) did not strike, a new viewpoint / mentality about how long you could keep a car became established.
I think in this long, long and ugly housing market bust, many of the discretionary buyers became convinced “Ah, we don’t really NEED a new house; this one is okay; let’s just stay put.” *This new viewpoint / mentality could be more or less permanent.*
IOW, the whole way people view voluntary house moves may have changed for the foreseeable future, with many more people now be willing and comfortable with staying put, rather than going through all that is involved in buying / selling /moving into another home for purely “we want a different home” reasons.
If that’s the case, it doesn’t matter when or how low the market bottoms out. The number of homes that change hands will never reach what they were when many people had a “let’s move UP as soon as we can” outlook as opposed to a “why put ourselves through that-—let’s just stay put and make do, or we’re happy with the home we’ve got” outlook.