It’s no secret that the attitude toward owning a home in recent years has changed. In the go-go years of 2003-2006 Americans got caught up in a frenzy of speculative home buying, banking on unlimited future appreciation to compensate for miniscule down payments and massive overleveraging. In retrospect this real estate bubble was all too apparent. But like all bubbles throughout history it’s easy to identify when it’s over, yet millions were swept up by it when the going was good. So, where do we go from here?

What we are experiencing now is like a twist on the classic 4 step grieving process – let’s call it the Real Estate Bubble Grieving Process. It’s made up of the following stages: Denial, Grief, Overcompensation, and finally Acceptance.

We saw Denial in full force as we led up to the peak of the market in 2006. People were standing in line to buy chits to purchase condos in Florida, then selling those chits to the next sucker in line for $20,000. Cleaning people were buying penthouse apartments in Manhattan, then selling them for a $500,000 profit and buying a bigger one. Crazy!

Next came Grief. The market collapsed and millions of people faced financial ruin, the inevitable consequence of a market gone mad.

Then we entered Overcompensation. In this stage large numbers of people decided ALL home ownership is bad. Clearly this is wrong, but the lessons of the past few years will take a long time to fade. So for now, many people who arguably SHOULD buy homes are not because they are too scared. If they don’t own, they rent. So now the rental market is overheated and rents are skyrocketing.

Finally we will get to Acceptance. I don’t think we’re there yet. Acceptance will happen when homebuyers finally accept the fact the buying a home should be a lifestyle decision as it was for most of our history, not a speculative investment. The folks that realize this first will get some great deals as the rest of the buyers sit on the sidelines, too scared to act.

What stage are you in?