Unless the Fed is going to start buying millions of homes outright, prices are going to fall to what buyers can afford.
There are two generalities that can be applied to all asset bubbles:
- Bubbles inflate for longer and reach higher levels than most pre-bubble analysts expected.
- All bubbles burst, despite mantra-like claims that "this time it's different".
The bubble burst tends to follow a symmetrical reversal of very similar time durations and magnitudes as the initial rise. If the bubble took four years to inflate and rose by X, the retrace tends to take