Originally Posted by mjw930
Although real estate prices are at historic lows...
Not really in real dollar terms following the long term home price trend line. We're still above in many areas with a further 5%-10% decline to return to trend line not out of the question. Realistically, these things should dip below the trend line before hitting their lows.
Home prices are also being propped up by artificially low interest rates engineered by the Fed and of course nearly all new mortgages are being bought up by the Fed Govt. and backed by them. Once interest rates are no longer being manipulated, they will rise and thus home prices will need to fall further to match the monthly affordable payments under higher interest rates (6%-7%+) since most people buy homes via financing versus outright cash purchases. Moreover, a return to the 20% down is happening and will continue to be entrenched as the Fed Govt exits its involvement and the banks return to originate and hold and any mortgage investors require more skin in the game...resulting in even fewer buyers and more downward price pressures. Add higher home ownership costs (taxes) and home prices will have to further decline to remain affordable on a monthly payment basis. Selective inflation that doesn't included home prices will also put downward price pressures on home prices.
The bottom line in real estate is that you make your money (or lose the least amount as the case my be) at the time you buy it, not when you sell it.