It sounds to me like Ben Stein is talking about the majority of the USA and leaving CA, parts of Florida, Las Vegas, Washington DC, Seattle and a couple of other places out of his thought processes. You can’t look objectively at southern CA with all of the facts that are now in place and not come to a conclusion that prices will drop substantially. Will it be 20% or will they fall 50%…….? Nobody knows at this point but to me, it looks like we’re going to see a slow slippery slide as time goes bye and finally see a bottoming out in late 2011 or mid 2012. People will have to accept that their house is worth a whole lot less before they will lower their prices to the range where they will actually find a buyer. This will take some time, depending on each individuals circumstances. I read a story yesterday in the San Francisco Chronicle about a man who had been trying to sell the his house in the Castro Valley (SF area) for six months for $550k with no offers. He actually had equity in the home because he owed around $350k. He bought the house in early 2006. He did the smart thing and held an absolute auction. The house sold for $450k, he freed himself from the mortgage that was going to re-set next year and he walked away with some cash. Time will tell but I think he did the smartest thing he could do.
As prices in SoCal drop further and more ARM’s reset to higher rates, a huge number of people who have no equity will simply walk away from the house. Then, when the foreclosed house sells at the true market value, the comps in the area are down the drain for anyone else who has to sell their home. There are many things that are all inter-related that will continue to drive the crazy prices in these bubble markets back to some sort of sanity. When you can buy really nice homes in most parts of the country for around $200k, CA and with liar loans down the drain, etc, my guess is that SFR’s will drop as much as 40% (or more)……………but who has a crystal ball? I just look at the facts and make logical assumptions.
