[quote=bewildering]There is zero chance of a 50% drop in house prices. There is a link between house prices and rent prices. Unless rent prices collapse then house prices will not fall by 50%.
Think about it. Even with a 20% drop in San Diego prices, it makes financial sense to buy a property and rent it out.
Exactly. The post-bubble plunge happened because prices had become massively unhinged from rents (or incomes or any other fundamental). That’s just not the case now, to anywhere near that degree.
To put some numbers on it, here’s the price decline it would have taken to get to the historical median valuation (price to incomes and rents)… assuming there was no growth in rents/incomes during the price decline:
bubble peak: 42%
now: 16%
Just no comparison. If you are expecting a 50% decline, that means you are expecting prices to fall to their historically typical valuation, and then drop another 44% from that point, which would of course make them far cheaper than they’ve ever gotten. And that assumes no intervening rent/income growth, which of course there would be. It’s a mathematically indefensible forecast.
