OK, pardon the sarcasm here, but what exactly do you think the word "probably" means? Because to me it means "the author is stating an opinion and is in no way saying that opinion is authoritative"
In other words I don't "know", I never claimed to "know" so you shouldn't accuse me of it.
If you're going to go so far as to quote the line at least read it first and try to look at what the author's actual meaning was.
For the record I based my opinion on the simple fact that things around me shouldn't cost as much as they do. The house two doors down from me is 2 bedroom, needs a new roof and was still valued at $750,000. In my opinion a two bedroom house simply isn't worth that so I don't expect it to bounce back to that value.
A house (or anything else) is only worth what someone will pay for it. If houses are selling for $750k, by definition they are worth $750k. You can hate it and refuse to think that anyone should ever pay more than $100k for such a house, but as long as people are willing to pay the price, that's the value.
But that's the point, no one was paying that much for it. It was inflated by a speculator's market. That's what a correction is. It's the market re-evaluating assets and reassessing their price based on what people are actually willing to pay and not what some real estate speculator or junk bond salesman said it was worth.
This is a very naive (or doctrinaire) view. Please read one of the canonical value investing books, or Cunningham's book of excerpts from Berkshire Hathaway's annual letters by the chairman. For a more scientifically minded angle to this topic, please see Didier Sornette's "Why stock markets crash" (PUP 2003). Price and value are two different things, at least in my representation of the world...
I can't comprehend why this was modded down. The book is fascinating and provides us with an insight into valuation. It really is a topic that is difficult to sum up in any reasonable time. I wish I could find a free source for it, but I found the google preview.
In other words I don't "know", I never claimed to "know" so you shouldn't accuse me of it.
If you're going to go so far as to quote the line at least read it first and try to look at what the author's actual meaning was.
For the record I based my opinion on the simple fact that things around me shouldn't cost as much as they do. The house two doors down from me is 2 bedroom, needs a new roof and was still valued at $750,000. In my opinion a two bedroom house simply isn't worth that so I don't expect it to bounce back to that value.