Here is a quote about the last downturn from Chapman I found on Lansners blog in the OC Register.
“The previous downturn in the housing market in the early 90’s was not short-lived. In Orange County, home prices declined for 54 months from the peak to the trough, decreasing 17.7 percent. It took another 51 months for the median price to reach back to its previous peak. A similar pattern occurred in many other regions of the state. Although there were significant job losses in the 90’s that sharply reduced demand for housing, in the current cycle, there is a different problem: a lack of housing affordability. Not only that, the job market is beginning to weaken considerably. The combination of these factors suggests that the county is facing a multi-year downward spiral in home prices.”
These things take a long time and they don’t bounce off the bottom like a stock. Regardless of any bailout I anticipate that 2008 will be toast, you will see falling prices all year with a possible exception this Spring where it may just go flat. The final shoe to drop in this housing bust is If we enter into, OR what degree of a Recession we encounter as a result of this mess. Pay attention to local job numbers. Here is my prediction of what the bottom will look like, it will be when RE becomes the most boring asset class in the world to watch and will be the furtherest thing from people’s minds.
