The Residential Real Estate Crash Index Message Board

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Strategies & Market Trends : The Residential Real Estate Crash Index

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To: Tradelite who wrote (32872)	6/8/2005 1:02:35 AM
From: Mike Johnston	Read Replies (2) of 306849

You asked: what is going to propel prices further? Maybe nothing. Real estate markets don't just go up and down. Sometimes they operate in a state of relative equilibrium With appropriate monetary and fiscal policy, the real estate markets would have been in the state of relative equilibrium, to the long term benefit of the economy. However that was not the case and i would not expect that outcome under current circumstances. No bubble ever resolves itself with a state of equilibrium. Not every buyer is coming to the table with only one income in the household and no down payment (so some of the statements about how prices can't go up because wages and salaries aren't going up accordingly do need some qualification every now and then). When prices stop increasing, no additional equity will be created to be used as a down payment on trade up, vacation or investment property. This will remove a big chunk of demand. And the prices will be determined at the margin, by those who will be able to afford the house based on their savings and wages and not on windfall gains from previous appreciation.

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