But, what if house prices keep dropping?

Why is it that most people buy when prices are high and run away when prices are low?

Here’s one of the houses I bought in late 2010. Paid less than replacement cost; happily rented at $900 a month representing a 12% plus gross return. Yet, I was virtually alone searching for these bargains; no competition. Nobody buying; everyone seemed to be afraid. Now the market is climbing and people are buying again. Why is it that most people buy when prices are high and run away when prices are low?

BUT, WHAT IF HOUSE PRICES KEEP DROPPING?

Here’s a BUT question I encountered a lot while searching for property in Florida in late 2010. Seemed like the conventional thinking was property prices were going to drop to zero. I remember a particular encounter when this question popped up. It was during a bank visit to see about getting a loan. They wouldn’t talk to me about a loan but they did talk to me about setting up a wire transfer service.

As I started filling out the forms to set up the wire transfer service, the young lady at the desk started up a conversation, “What brings you to Florida?”

“Oh, I’m looking at houses. I’ve never seen such good bargains. I was afraid of missing the window of opportunity but it still looks like there’s plenty of good buys out there.” I answered like an excited kid on his way to Disney World.

I wasn’t expecting her excitement dampening reply.

“I would never buy a house. Never. I bought one before. Thank God I got rid of it; took a big loss. But, I’ll never buy another house again in my life. And, all my friends feel the same way. None of us will ever buy a house again…