Any asset that increases more than the underlying fundamentals over a period of time will always come down. How many people in March of 2000 would ever predict that the Nasdaq would drop from over 5,000 to almost 1,000? They were telling you that the gains might not continue, but none of the experts would dare say it would go down to 1,000 in its lifetime, let alone within two years.
In the summer of 2000 the NYSE was at almost 12,000...check it out today. So much for the long run and 9 percent per year.
All assets where the idiot public and cab drivers become experts on are bound to crash. This goes for stocks, beanie babys, baseball cards, houses, and everything else. There has never been an exception...when people who don't know what they are talking about are making money the downside is ALWAYS nasty and more than expected.
That is why I will be selling my domains when I start overhearing people on the street talking about them....probably many years down the road.
Comments like "They don't make any more land", and "Real Estate doesn't crash", are exactly the type of comments you hear right before the dagger.
It used to be that people would have to save for years in order to put a down-payment on a house....now they don't even need good credit.
In the late 90's stocks were the "greatest investment of all-time", and then real estate took it's place. When stocks are sexy it is time to sell, and when real-estate is sexy it is time to sell and rent an apartment.
Remember CNBC a few years ago....all the hype...all the "profit from it" talk? It's not even the same show anymore.
If you put zero dollars down on a $500,000 house and that house loses just five percent you are out $25,000, and your payments will likely be going up since the odds are that you have an adjustable rate mortgage. Bankruptcy will be happening soon.
The beautiful thing about the coming housing crash is that no one will take responsibilty for their actions. Everyone will claim that they knew it was happening. The big problem is that houses are harder to sell than stocks. In stocks you can wake one day and say "I've had enough" and sell everything. Most people don't have the guts to sell houses that have appreciated the last few years. If anything, they will blow that equity by buying a bigger house. They will be in for some Chinese Water Torture in the next 5-10 years or so as they wait for the values to come back.
Good luck. When it comes to markets and investing most everyone gets what they deserve...eventually. I bet 99 percent of the Enron investors couldn't even articulate how that company made money. I am certain that most real-estate investors of the last few years have little historical understanding of real-estate cycles. All they know is what their monthly payment is right now, and that values have increased in the last few years.
I look forward to watching it unravel. I will be buying in California in about six years....when real-estate is the kiss of death.
A house is a place to live; NOT an investment. When it is considered a great investment then BAD things will happen. Every time.