First, a comment about my position: As an appraiser I’m not “hoping” for a specific percentage of correction. I’m hoping for an orderly and somewhat rational market. That is, a market where there is a direct relationship between the pricing and the income necessary to support that pricing over the long term. If the market decides that this region is so special that people should be willing to pay half their gross income for their housing from now on then so be it.
As has been mentioned by other posters, although I think the -50% over several years could easily happen I also think that type of decline will cause a lot of unintended consequences for a lot of residents in this region. A lot of collateral damage, and I’m not talking about the people who are holding overpriced properties right now. That’s why I wouldn’t mind being wrong about the 50%.
As for the lenders, I really do think it’s a matter of being overwhelmed. While they can play a little dodgeball with their quarterly earnings, sooner or later they have to state their annual earnings. I think that’s when everything is going to come to a head – at year’s end.
