[DesertCat]

Your friend is way wrong, that's the same logic buyers had after the great crash of 1929, and they suffered enormous losses for three years. This is the greatest real estate crash in history and it just started. No one knows how severe or mild it will be. Read the fortune article for one perspective. Another perspective is that homes can only appreciate around 4% a year on average over long periods, otherwise the average % of income needed to buy one would approach 100%. To restore that long term baseline to 4% after the bubble, we either need a substantial decline in prices over a short period, or no appreciation for 7-10 years. Look at measures like inventory for sale and ave sale time and you will see a huge overhang of houses in most markets and that implies lower prices are needed to move them.

And do you really think someone is going to sell you a $180k house for $120k in foreclosure? If it sells for $120k in foreclosure, its market value ain't much higher, banks may want quick sales but they aren't fools. They might sell you a house that you can put $20k in and make a small profit, but selling in this market is swimming against the current. The house could lose $15k in value during the refurb. But if you can buy a house for $120k that would cost $1200 per month to rent, you don't have to worry about selling it because you can always rent it and have positive cash flow.