We have had a number of posts on this topic. This is how I see it.
There are 2 types of people at work here. Real estate people. We find houses that are distressed and buy them at a discount. We then rent them out or sell them.
Then there are the financial people. They trade securities. Securities generally move rather predictably because there is a pretty steady state of people buying these securities as their needs dictate. They are bought as an effort to balance a portfolio or a place to put cash from a 401k or IRA. These securities are sold on a steady state basis also. As a person has to send a kid to college, or buys a vacation home or retire they will sell these securities. Since everyone doesn’t have these types of needs at once they are spread around and no big movements are caused. But large movements also happened and these are movements that are like cows in a herd. They are caused by emotions. They are bought on greed and sold on fear.
The financial people are not real estate people they don’t understand real estate. They are like the Dustin Hoffman character Raymond in the movie Rainman. When in response to a person that was amazed as to how smart Raymond was because he could count and add so well and fast, the Tom Cruise character turned to Raymond and asked him “Raymond how much does a candy bar cost” Raymond said “about a hundred dollars” The Cruise character then asked him “Raymond how much does a car cost” Raymond said “about a hundred dollars”. You see Raymond does what the does well but he has no idea about scale. Financial people are the same. They are looking at the mortgage business and counting and adding the money instead of understanding the underlying business. The subprime market is 14% of the total mortgage market and of the subprime mortgages less that 10% are in foreclosure. As they panic it will hurt the mortgage companies but it will push more mortgages my way and make me rich. Stand back and look at it don’t get pulled into it.
You need to go out and find some deals. You can emerge from this a genuine real estate tycoon.