Tom.
Firstly I know it wasnt you on the Adelaide statement Id read it elsewhere myself.
I dont disagree with you on many points your presenting.
But interested in your view of how better off do you or those you follow believe home buyers will in x? years time.
That's an extremely wide definition, as you no doubt realise.
Those home buyers who bought several years ago and have by now substantial equity in their properties, will be better off; no doubt about that. That applies to most of them even if we have a pull-back in prices.
Those who bought in the last few months may well find themselves with negative equity and even facing repossessions.
It really is no different to any other investing. Had you bought CBA shares at the float, you'd be laughing even after the recent 30% drop. Had you bought a few months ago and funded it with debt, you'd be looking at pretty severe margin calls, with your equity being decimated if you couldn't cover those.
Will they ever be better off?
Those who may be going to get wiped out over the next few years may take a long time to "be better off".
Will there ever be a time which is right to buy?
Any prudent investor will buy when the fundamentals on the property/investment s/he is contemplating the acquisition of are a lot less stretched than what we are seeing now.
If so what in your view will be the signs.
See above. If you can find a property that returns 5% or more in net rentals, and afford to buy it on the basis of being able to carry the loan repayments should you have no tenant for a while, or being able to cover interest rates at 12%, then chances are you will be doing OK in the long run.
These are just basic rules of prudent investing, as I'm sure you'd agree.
Do you expect prices and wages to eventually return to say 4x ratio?
Given the long term trends here and in other countries, I do expect these to trend significantly towards the mean values.
There will be crashing of prices I agree in the rediculous situations you mention.
Not so in those that are more "Realistic".
Of course, I agree with you.
Will inflation be bought under control.
Recessions generally do have a positive effect on inflation.
Back in the 80s housing dipped but didnt crash.
In the years to follow prices just took off again albeit years later.
And it will be the same now. Prices are not dropping everywhere in America, either, but the possibility of multi-trillion dollar losses I saw mentioned by a fellow who has been an adviser to the US Treasury just today still remains.
Not all builders will go broke.
Not all investors or home owners will lose their shirts.
Again, I couldn't agree more. But the vast majority of property investors would in such a scenario be wise to at least not expect large capital gains over the next decade or so.
Allowing for the after tax cost of negative gearing, if you have no or only very low capital gains for several years, then it would be hard to argue that your money would be better off in a term deposit.
Cheers,
Tom R