Housing market slump?

[Mike]

Assuming 4% annual core inflation over 20 years, a $200,000 house in 1987 should be worth $438,224.63 in 2007. This is a simple time value of money calculation utilizing 20 period compounding of 1 + i, or in this case (1.04)^20.

Thank you.

What I think drove the silliness that we see today is all these funny new financing terms. People who have no money are suddenly able to buy houses. These people assume that their property will increase in value forever and they'll be able to gain equity despite only paying interest. What has happened is that prices have gone so high that young people cannot get in to the base level houses. Without this influx of new owners, prices cannot go up. People panic, people sell, prices drop, foreclosurers on these stupid deals increase, market floods, prices drop even more.

Now is not the time to buy. I see far too many friends trying to buy just to buy... It isn't worth it unless you're certain the market is about to rebound or you plan on living there for 10+ years. People who bought $350k condos expecting them to rise forever and then buy a house with that money once they meet someone? F'd. They've now sunk all of these costs/payment in to something that is going to net them nothing. HUGE LOSSES.

I'm very eager to see how the next couple of years go around here. If it doesn't go the way I expect it (30-40% drops), I'll be moving to Charlotte, Charleston, Asheville, or Cali