The issue of liquidity is the primary discussion here. How liquid can RE be? The argument that this downturn will be long and slow is a good one due to the traditional illiquid nature of RE. The most liquid aspect of RE are the developers, they can dump and may have to dump inventory to keep a positive cash flow. The greatest percentage price declines will be set by the developers. That will be in line with the previous downturn IMO. Now the big difference in this downturn that I see and that has been discussed on this thread is the role of exotic loans. This is where we are in uncharted and untested waters. You are probably looking at the most leveraged housing market in history. As the mania ensued people were buying homes (especially 2004 and 2005) that were 7X to 12X income using exotic loans. The fast appericiation of the home would make the two ends meet when the loan reset. Well it was supposed to work that way. When the two ends don’t meet people have to sell or face foreclosure and many will face foreclosure. This dynamic increases the liquidity of RE making steeper and faster price declines possible. IMO we are looking at one of the most liquid RE markets we have ever seen due to credit standards basically evaporating. The good thing is we don’t have to wait too long to determine how severe this aspect will be, the majortiy of ARMS are resetting starting about now and peaking in 07 and 08.