"Most real estate investors expect their property to return a reasonable rate..." - I agree. But "Most" can mean, let's say, 90%. That still leaves 10% of buyers to purchase a property based on desire and financial ability, not rate of return. Ever hear a buyer of a new Porsch say it was a great investment? Maybe an emotional investment.
Let me give you another example... on Lagrange Bayou, a bayfront home just recently sold for 1.5 million (cost basis was probably around $700,000 about 4 years ago). It took a couple of years to sell, but it did sell. Again, someone WANTS to live in the home and was willing to pay a good price for the waterfront experience. Could the owner rent that house for $12,500 per month (based on the 120 factor)? Not a chance in hell.
Again, not all future purchases of prime real estate will be based on rental return. There are a lot of rich baby boomers ready to retire soon. Believe it. They have made their money and will buy what they want.
Again, not all purchases will be based on immediate rate of return. Some will simply buy for themselves driving up the price of the more desirable properties. This won't happen overnight however. I've said before, those properties that I consider not to be prime, will be in trouble for a while if they were purchased at the pre-Hurricane Dennis prices, IMHO.