There are some drawbacks:

I can see where renting wouldn’t be comfortable, and we may be waiting another 1-2 years before buying again. Having sold over 2 years ago, that means the kids will be 4 years older, but there are large apartments and even houses to rent in good neighborhoods in the meantime.

Also, renting is more expensive for us than staying put would have been, but investing the money (even putting it somewhere at 4.5 – 5% interest, you’ll cover yourself.

Ending up with all that cash is definitely worth it. For us our apartment gave us was two years pay before taxes! How can I complain?

In seriousness though, I did some reading on this a while ago and recall reading that the median income had gone up 3x% over the past 8 years. When you think about it, this is really only 3-4% per year, which is less than the rate of true inflation over the same period. (Inflation computed the same way it was in 1990 is more than double the currently reported figure, I think almost triple – they’re changing the math to get the number they want to report.)

So real wages have been falling, even though nominal wages have gone up during this period.

There are some who are jumping at the meager price declines, but not many.

Let’s hope things don’t get too bad. We don’t want to become a third world nation just to get a bargain.

What?? I thought RE only went up. Ok, maybe not, but we hit a permanently high plateau! And now, all of a sudden, a drop in prices is “healthy”??!?!?!

JimAtLaw: how is it that buyers are being unrealistic?

Simple, they’re still buying! They obviously expect the bust to be short and shallow, which to me is unrealistic.

Your 30-40% figure is accurate for a normal market, but this isn’t normal. I bet we’ll see 10-20% over 1999 prices at the very bottom (if not lower).

Whose wages have gone up 30-40% since 1999? Realtors? I don’t mean to get in your face but this economy has been good for those at the top but not for those at the bottom 80%.

The real problem here is that wages have been relatively stagnant for the middle class and that is what really makes the run-up in prices even more fishy.

Sellers need to get realistic and price homes based on wage increases since 1999 – which is an increase of 30-40%, not 200%. The fundamental value of a home has not increased due to any structural change since then, price changes beyond inflation have only been due to speculation (both in housing directly, and in housing based finance products), so the “realistic” price is that based on (a) returns on capital for a home as a rental, and/or (b) historical prices for the area using conventional mortgage products and adjusted for changes in income. When sellers are pricing houses a for 30-40% increase since 1999, or cash flow positive as a rental, let me know, and I’ll be back at the table.

I talk to some of those same people. They read articles like Reagor’s and focus on how far it’s fallen- not on how far it will go. I’ve had several friends who can’t believe I still haven’t jumped in and taken advantage of this “buyer’s market.”

The market looks more like a “value trap” to me.