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Exactly right.

This cycle is following the previous bust cycles: stocks peaked first, then residential real estate, then farmland.

It took 10+ years after each of these previous cycles broke their bull phase peak for people to see real appreciation in real estate again.

These historical precedents are why I really have a problem with the perma-bulls here on FR who keep saying that this is just some liberal media conspiracy to talk down the economy. No, it isn’t. We’ve had a convergence of the business cycle, the commodities cycle, the real estate cycle coming together now because of past interventions and meddling by the Fed. The Fed thought (quite arrogantly, I might add) that they could conquer the business cycle with Freidmanesque monetary intervention.

I used to think along these lines, but I’m now of a mind that they (and I) were wrong, wrong, wrong. These cycles are predicated on human behavior and psychology, which the Fed cannot change. They can play with the edges of the beginning/end of cycles, but they really can’t turn the mass of public opinion once things start to break.

Take what you just said: the “owned residence as an investment” mentality: you’re so right. Once a generation gets burned and burned badly from believing this chestnut as a Big Rule, an entire generation of Americans will ridicule this thinking for 20+ years thereafter.

Think about how the Depression Generation was so wary of stocks - for a long, long time. Some of their generation dipped into stocks in the 60’s, only to get burned again. Wall Street didn’t recover any sort of Main Street America appeal until we got all the way into the 80’s, and then we were talking of a whole new generation. That’s what it took to change the thinking of stockbrokers and Wall Street as a bunch of hucksters and cheats.

I believe the same thing is going to happen with real estate now — there’s a lot of people who are going to be burned by this real estate collapse and they’re not going to buy into another house for a long, long time, and part of the reason will be that it will become rather cheap (relatively speaking) to rent, what with all the overbuilt housing out there that will be available for leasing.

>>...it will become rather cheap (relatively speaking) to rent...<<

I pay $1,600 to live in a house that “was” reasonably valued at $525k a few months ago. The amound I save every single month, compared to what I would pay if I bought the house, is staggering!

Oh, and I just call the owner if something breaks. I don’t even waste mental cycles on it. And if I find a better job, but it is too far away? I move.

Once you own a home, you’re sort of married to it. Especially nowadays.