I don’t think that a 20% decline in prices this year is actually possible given the illiquid nature of RE and the number of transactions that would have to take place in order for that to happen. The thing that will stand out for the balance of the year as you pointed out will be a severe drop off in volume, more than the severe drop off in volume we have today. I agree this last round of developments in mortgages has more punch. We are only 5% off the peak prices and all of a sudden we have 1990’s lending standards in place if not tighter. The real story here is the economy, this is a shock to the system. I guess the real question is will the credit markets stay this locked up and for how long? What will the Fed do? In areas like Southern California this is not as much of an interest rate story as it is a quality of loan story. The Fed could drop half a point (which IMO would be a dangerous move for a variety of reasons that have discussed on this site) but that won’t bring back the lax underwriting that fueled the market. I like many others on this site have been following this for a couple of years now, this has the feel of a major shift in the market. It’s still like watching ice cream melt but now that ice cream is sitting on a concrete bench in Phoenix in August at noon. JMHO
