The local neighborhood is sprouting up "For Sale" signs the way cow pastures spring up mushrooms. Looking at the MLS, there's a townhouse that sold for $850K just a year ago, now listed for $650K. Which of course is still nuts for a condo -- crap, I can rent a 2 bedroom townhouse for $2000/month that's every bit as fancy as that townhouse, and even with the interest and property tax deduction (I'm in the top tax bracket, so I basically get 1/3rd of that back from the IRS) I end up still coming up $1000 or more ahead per month. I can't justify purchasing it until it gets well under that. Hmm... just worked the numbers via a handy calculator at my credit union, and it says the proper value of that townhouse to make it worth buying it vs. renting it, given the mortgage tax deduction, is around $450K.
So now you know how crazy things got during the housing price runup -- things basically got priced at double what they'd be worth in a free and transparent market. People bought the things because they were expecting 20% appreciation and then they'd flip it in a couple of years, instead of as places to live. If people did the sensible thing and bought a house as a place to live instead of an "investment", which is what people are having to do now that there is *reverse* appreciation, you wouldn't have anywhere near this level of price runup. But people weren't rational. They were in a "get rich quick" attitude, and this is what they get for having that kind of attitude.
So anyhow, I'll check back again in six months and see if the prices have gotten down to the point where it's worth me buying. That's the upside of a housing bust -- those of us who were sensible and view buying as something to do when you need a place to live, not as free money from endless appreciation, are gonna make out like thieves in the end. And the folks who were telling me a year ago "dude, you're stupid not to buy into this 40% appreciation!"... bwaahahahah!
-- Badtux the Well-housed Silicon Valley Penguin
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