You know up until yesterday I was hoping for a rate cut so I could afford to actually buy into my area (Baltimore-DC Metro). But someone on this board (can't remember the name) brought up a good point. Just like all housing booms in the past 50+ years the market has been tracked there is a bubble that gets burst by a double digit interest rate. This is the first time in history that homes had seen a double digit "appreciation" and we are yet to see the true explosion on the "Bubble".
If history repeats itself AGAIN, like recently in the 70's and early 90's, interest rates will hit a double digit and home prices will once again be reasonable in "Middle Class" standards. One of two things will have to happen, either wages rise to meet current prices, or prices will fall to meet current wages. Well, I'm guessing not many employers are going to start handing out 30-40% pay raises and considering the number of foreclosures rose 36% from June to August (56% in my area) I'm thinking the prices are going to fall. Double that with an increase of unemployment rates, there is going to be a glut of homes REO and banks are just going to dump them for whatever they can get.
That $350,000 house down the street in two years will be appraised at $160,000 because all the comps in the area will be REO's bought up by investors for penny's on the dollar. It's like CA's buying up debt, except in this case it will be Land......