Considering we are dropping thus far at alsmot 1% a month – no I don’t think it’s likely.

Bear in mind these falls have been happening in primo selling season where sellers are still in denial – now we are into the winter wind down and panic will be starting to settle in for many people who have the sword of Damocles hanging over their heads in the form of ARM adjustments.

Add into that the first waves of ARM adjustments coming this winter / next spring – I think this thing is going to snowball – I suspect it’ll drop 10% YOY by December and accelerate down in the spring.

Also the Japanese had these things called “Savings” that are lacking in US financial culture – no wiggle room here to try and ride out the wave that’s coming.

Japan’s residential and commercial property bubbles resulted in large amounts of bad loans for the banks. The bad residential loans were a small amount, and the RE bubble was not tied to consumer spending. So the main problem in Japan was the busted commercial property values, which caused lost money for companies and banks.

As the value of commercial properties fell, companies cut back on spending, reducing economic growth. In Japan, apparently corporate spending is a bigger part of GDP than here, so a cut-back in corporate spending slowed the economy.

So Japan’s corporate sector and banking sector sustained big losses, and their monetary policy made several blunders, which sustained the economic slump.

Our housing bubble is more related to residential real estate, excess employment and inventory in anything related to housing, and excess consumption financed via MBS from the rest of the world. Our slump could be bigger, since our dependence on consumer spending is greater than Japan’s dependence on corporate spending, and we have sucked savings from the rest of the world to create our bubble.

Our brightest economists and Fed leaders studied what went wrong in Japan. They will not make the same monetary mistakes that prolonged Japan’s slump. OTOH, our federal and trade deficits and personal debt are higher than Japan’s so it will be difficult to jump-start our consumption-driven economy.

Yet, the fallout here could be worse, since housing-created wealth has driven GDP growth. Once housing prices stop rising, GDP growth will fall, and turn negative. Add to that bad loans in the hundreds of billions of dollars, a GSE bailout, pension fund bailouts, and you have the possibility of a great depression. I am admitting that instead of a recession, this could be a depression. The question is, what monetary, political, and foreign policy can come to the rescue? So yes, this could be as bad as Japan, or it could be worse.