I’m not making that assumption by any stretch of the imagination. Not when I work for a fortune 50 company that has cut my function 30% in the last 3 years and continues to outsource with abandon. I’m acutely aware of the challenges the median will face with a strong recession (I was an economics major, and my idea of a good read is the economist).
That said, an increase in the unemployment rate from 5% to 10% is commonly considered catastrophic. Keep in mind, though that it’s only a 5% reduction in the number of people who want to have jobs. People underestimate how quickly things rush toward equilibrium in situations of extreme stress. You can’t assume that with housing prices, but forget it with the labor market.
Lets assume the median income drops 10%. That’s a pretty bearish scenario, but one that’s a possiblity. Based on the fundamentals we all talk about (3X income for a house), you are only talking about a 15K-30K reduction in the intrinsic value of a house. That’s a far cry from anything that would precipitate a 70-80% decline in housing prices, the fact that we are way above instrinsic value now notwithstanding.
This thread is a good reminder to me that there are both bears (I consider myself one) and lunatics on this board. Anyone that thinks the price of a house in San Diego is going lower than the price of a house in Omaha (or rural germany for that matter) is bat poop crazy.
