Liquidity of RE is quite important. Very interesting arguments in this thread. The speed of RE depreciation will depend on how liquid properties are. Traditionally, post-boom price drops have been very slow due to the inherently illiquid character of housing or land.
This time, however, it can be argued that housing will become (or is becoming) less illiquid due to:
(1) Highly leveraged buyers (I can’t call them homeowners, since they are really owers).
(2) Countless newbie investors who jumped in the bandwagon w/o really appreciating the risks involved.
Without some degree of liquidity, meaning, without a substantial number of transactions, prices wouldn’t drop and we would be stuck with the 2005-2006 comparables. That’s why I think that Powayseller’s (or renter?) argument of high illiquidity in the post-boom era contradicts the notion of fast housing depreciation.
I think that factors (1) and (2) above have different prevalence in different cities or regions, and therefore, the speed of housing depreciation will vary widely from say, La Jolla on the one hand, to San Bernardino, on the other. However, cumulative depreciation (in percentage terms), will be about the same across all areas by the time the cycle bottoms out.
