[DesertCat]

I'm really convinced that buying real estate is a bad idea right now, and that's coming from a guy who has about 25% of his net worth in subprime mortgages.

My reasoning is the Fortune article that predicted 5 years of price declines until we get back to normal, based on price to rent ratios. But I read an article in my local (Arizona) paper yesterday that made me wonder if Fortune was being pessimistic enough. Here's my rationale.

Phoenix rental vacancies are increasing. I thought that strange since people being foreclosed on would need to rent, right? Well I think what is happening is too many houses were built over the last 5 years due to the influence of real estate "investors"/speculators buying and flipping. Now they are stuck with homes they can't flip for a profit and those are being dumped into the rental market. This means rents are declining and will decline more until demand for rental units meets supply again.

So if rents decline, price/rent ratios are even more out of whack and we'll need an even bigger housing price decline to return to the historical norm.

And we haven't even discussed what happens if interest rates increase.