Ordinarily, I would say you that your are correct about the "correction", however, I believe this one is a "bubble about to burst." The difference this time is that during the long-lasting boom, unlike previous strong markets, homeowners and purchasers have widely taken advantage of alternative financing. With 100%, even 125%, financing people don't have any equity in their homes, or worse, negative equity.
Furthermore, with variable rate, interest only options their payments have risen beyond what they can afford which means they are strapped for cash too.
I think what the effect that has on the market is that they cannot afford to sell their homes. Even though the "values" have declined, making the market more appealing to buyers, the sellers are still asking too much for their homes. They can't afford to sell it for what they paid, let alone the lower value, because they don't have enough equity to cover their mortgage(s) and the Realtor's commission.
The market is going to be pretty rough for the next several years while homeowners try to pay-down their mortgages to the point that they can afford to sell. Refinancing, which has been a big part of our booming market for sometime, is not going to be an option for a long time to come.
Just my opinion,
Robert A. Franco
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