Doesnt seem like there is much worthwhile to talk about around here so I thought it would be cool to revisit a legendary historic thread and update it. Here’s where we started and I follow it up with another post as to what actually happened:

The Original Post:

On a couple threads there has been some back and forth about what is coming in the next few months. Admitting I am in the long and painful decline camp with SD R and a few others. On the other side we have those that believe a large chunk of pricing (10% or more) is about to be taken out of the market quickly (LS2008, Rustico etc.). I’m not married to my opinion but beleive what I do based upon what I see in the markets I generally follow. Here’s my case:

Closed sales figures for the 1st 5 months of 2007 vs. prior years for Coastal SD from Point Loma through Carlsbad show that volume is not declining there.

2004-1489
2005-1432
2006-1218
2007-1241 (still more late reporters coming)

Here is the averages represented by these sales (i.e. average size, selling price and price/sq ft).

2004 2,684 sq ft $1,072,428 ($400/sq ft)
2005 2,624 sq ft $1,176,811 ($448/sq ft)
2006 2,703 sq ft $1,252,146 ($463/sq ft)
2007 2,696 sq ft $1,199,774 ($445/sq ft)

I only have inventory for a couple ZIP that I follow closely but it is way down vs. last year in these areas.

My problem stems from my inability to see how a pricing collapse would happen administratively. I just dont see people with equity dropping their acceptable prices form 850K to 750K or from 600K to 500K. I dont see the lenders doing it either with inventory levels where they are. I’m not saying it’s can’t happen, I would just like to here some theories as to how it could play out over the next 6 months so we can all kick them around.