You are right about the “second approach” being the easier method. It would be great to just simplify all of the recent developments and say “we will revert to the mean”. When the dust finally settles, that could very well be the end result.
But what if all of the reasons we have sited for a major decline: ARM resets, RE industry job loss, HEW funds drying up, evil 80/20 & exotic loans… etc – what if the true proportion of the SD population effected (or is it affected?) by these factors is mostly insignificant? What if most of the homeowners here bought at the right time and are not in over their heads? Maybe the larger influx of wealthy foreigners moving in has caused SD to become the new San Francisco, and our underlying characteristics of our hometown are under a major transformation. Could it be that we will revert back to the mean, but “the mean” is now a redefined, less affordable mean?
I would love to see someone attempt to quantify the factors sited so often on this site. I for one am dying to know how many people who live on my hoity-toity La Costa Valley street are really under-water and at the verge of ruin. Maybe 50% or maybe only 1%. It would be interesting to know. I think I saw somewhere that 80% of purchases in the last 3 years where made w/ ARMs. And a large % (can’t remember the exact portion) were zero down. Could we apply this to the number of homes sold from ’04 to ’06 and come up w/ # of homes in trouble? That is probably simplifying things a bit. But it would be cool to see the results.
LA renter, you’re right about the impact of troubled borrowers who can find a way to survive – their disposable income is squeezed & there goes our local economy. But again how many people are we talking about?
