I read ARMs are starting to hike upwards. Around 35% of mortgages are ARMs, so as these rates start to increase towards fixed rates, your pool of buyers will decrease. That assumes buyers cannot qualify for a fixed rate mortgage.
The main driver for a correction, in my opinion, is mortgage rates. If rates continue upwards, more buyers will be squeezed from action. Fewer buyers = Less demand = Stagnant or lower prices. I'm not sure if that will hold true for California. You might have enough buyers to support high prices-or maybe not.
Rental properties require a special personality. It takes a lot of patience and sacrifice, but the payoff at the end is absolutely marvelous.
Wayne, another con I would consider is what if the market doesn't go down? Or, what if the wife says we must buy a new home? Can you stick to your logical, rational plan when emotions and wants grow? At some point down the road you might want a stable, long-term residence to build a family, and you might not feel comfortable in a rental (waiting for that major correction). On the other hand, Pelican Parts and your BMW book might soar, and in 2 years you'll be cruising Bel-Air in your 360....
Taking profits now might be a great investment. So, does anyone have a reliable crystal ball?
jurgen