Alex I think that one should run different scenarios on paper to see what COULD happen and how long things COULD take.
Speculating that getting back to 05 prices will happen “fast” needs to have a cause correct? If the “rise” to get to the 05 prices was not based on true value but rather a highly speculative environment that was fueled by lending standards that will not be present again, along with an entirely different credit market, then I need to see what will fuel the “fast” rise back to 05 price levels after this cycle runs it’s course. I feel as if after we are done with this cycle, (which will not be for awhile based on the two previous cycle durations, AND the amount of reset activity still in the pipeline) that the market will be in an much healthier state. That state would then dictate a slow measured appreciation rate, not the runaway train we saw over the past few years….
I think taking a measured approach like testing different depths of the depreciation cycle, and then a rise back up again based on a different rates of appreciation, say 3 or 4% per year will yield results that will support an argument (in either direction) a bit better.
Here is an example…..A home sells for 600k in 2005. Looses 40% of its value to 360k. Then at 4% per year it takes 10 years to get back to 532k. Now we did not factor in transaction costs either. See what I am saying?
