“it does not attempt to explain the cyclical changes in the 7-10 year cycle in which we are currently experiencing a decline. If the thesis holds true, we should see a higher bottom than last time for these areas.”
I agree. It’s a very interesting article. It makes me more confident that we’re seeing a normal up and now down real estate cycle superimposed on underlying growth in the best “superstar” areas that’s a little higher than the average for the country/world.
It fits with what’s happening in the market. Although the trigger is a credit squeeze hitting the low end, that’s just a withdrawal of unsupportable demand at the low end, bringing it closer to the long term national average in price appreciation. If that’s true, then expect more big price drops there.
At the top end, prices will be affected some by the credit squeeze and contagious psychology of a downturn, like in any normal cycle. But in the very best areas, barring external shocks, the impact might be modest. [Some people get very offended when I share my personal guess that some prices might not decrease a very large amount, so for them, I am saying here that all prices will drop by at least 50%.]
