I’m going to disagree with you and Powayseller on this one. Seems to me that expecting housing bubble to fully reset back to 1999 prices without considering inflation is not a solid analysis.
Expecting it to fully reset isn’t unreasonable, but expecting it to reset to the nominal prices is not – especially since you are so dead set on pointing out the effects of inflation when it comes to gold investing and the crash of the dollar.
Furthermore, if real inflation is even higher than government-reported inflation, as you and PS so often tell us, the real inflation figures should be used.
The famous Tuip market reset in a matter of months. The effects of inflation are negligible in that case. The housing market could take 12 to 15 years to reset – from 1999 to 2011 or 2014 (based on estimates in this forum of an upcoming 5-7 year down cycle).
Assuming 3% inflation for 12 years, this means real prices could be expected to increase by 42.5% – or that $280,000 house in 1999 “should” be worth $399,000 in 2011.
So, a “full reset” tells me the same house selling for 480,000 today that was once 280,000 in 1999 may only reset to 399,000 in 2012. This is a reduction of 16.8%.
My instinct tells me it could be 25% down, though.
Maybe Rich could pull out one of his really old graphs that shows housing prices NOT adjusted for inflation. You’ll see the last big crash is not visually impressive when you ignore inflation. A 25% down cycle would be devastating, compared to the last one, which if i recall was only 10% down or so.