Just for kicks, I did my own half-assed projection. But instead of drawing a cartoon, like Powayseller did on her web site, I posed a hypothesis: that perhaps this cycle is just like last time, but longer.
I tweaked the growth rate to exactly hit the last bottom: This came out to 6.2%
Assuming that this cycle is like the last time, I assumed that 2005 was the equivalent to 1990 in the last cycle. Then I used the Year-over year percentage declines from the 90’s bust to project from 2005 forward. That started turning up too soon, so I assumed that the decline in the fourth year of the 90’s decline (nearly 5%) continued on until I hit the 6.2% growth line assumption. The plot below is the result.
So there you go, based on one definition of “normal” growth, I would expect around a 22% nominal price decline from the peak lasting to about 2011-2012.
This is consistent with other computations of the level that houses are over-priced (including Rich’s if you assume that 3% annual inflation accounts for the other 20%+ loss in real prices).
Just another half-a$$ed way to get the same answer.
This is not a prediction of the trajectory we will follow this time, but I’m betting that the end result is pretty close.
