I won't deny that the real estate market is due for a decline but not as much as you guys are making it out to be.
Inevitably, as rates go up, prices should come down. However, as long as there is demand for homes, the prices will stay up. In SoCal, so many people move to the area every day from all over the world. San Diego county is pretty much real estate driven to begin with. Therefore, prices will not come down 40-50% any time soon unless there is a major disaster. The only people who will be screwed are, as Rugby mentioned, IO/1 yr ARM owners who are already stretching to make the monthly payments.
But I do expect the market to level off and perhaps even take a slight dip but you are not going to see the type of crash that we saw in the stock market in 2001.
I see the stock market as pretty underrated. It's been stable for quite some time now and it's proly a good time to invest in it. I'll most likely stick with the index fund but if anyone knows any good stocks, please let me know.
"Think of how stupid the average person is, and realize half of them are stupider than that." ~George Carlin