This is a method I would use to see where a house price will end up. Select a house with a sales history before 1990, preferably back to the 1980’s or before. Chart all the sales, draw a trendline to 2000 (because that’s when the bubble started), and extend it out to 2015. What should be the price of that house now, and in 3 years? For the median house, the price should be in the high $200’s, not in the mid $500s.

The decline has been very rapid, considering we haven’t even had any loan resets yet. Next year, 25% of all mortgages in the US will reset at higher interest rates, and my opinion is that over 75% of those will default, thus adding to foreclosures and distress sales. The biggest price drops will come in 2007 and 2008, IMO. Besides foreclosures, we’ll have massive layoffs in realtors, construction workers, retail, and high tech workers, anybody and everybody will be affected by the loss of MEW and the recession.