Here's my take on the real estate market
- If you're living in a home, and are not leveraged to the teeth, you're going to be just fine
- If you've owned a vacation/rental property for several years with a manageable mortgage and can handle the increased taxes, insurance and other carry costs, you're going to be just fine
- If you bought an investment property in the last year at sky-high prices with an exotic mortgage (leveraged to the hilt), figured on double-digit appreciation, and believe you will make a profit after carrying costs by renting it out, you're going to be severely disappointed.
- If you bought into pre-construction condos that will be complete in 2006/2007 and expect to flip them for a bunch of money--you're going to get screwed.
Areas with the highest and fastest appreciation will fall the fastest and the furthest (Florida condos come to mind). If you're looking for a homestead, I see no problems getting into the market now. Investment property is a whole different ballgame; the days of double digit appreciation and "flipping for fun and profit" are pretty much history. If the stock market takes off (like it did today), real estate will fall even faster as investors turn their back on and move out of real estate (whose illiquidity is a drag on one's portfolio). If you want to own more RE than your primary residence and a second home, there are other areas in the real estate game which are better investment plays than gambling on pre-construction condo flips (commercial or self-storage REITs come to mind).
Personally speaking, not a single one of my "boomer" friends, family, or acquaintances have expressed any desire to shell out $500,000+ to live in a 930sf concrete box in the middle of an SUV traffic jam.