I agree with a lot you have said, I just don’t think prices will drop 50-60% from the top of the market. I have been appraising in San Diego County since 1987. In the early to mid 90’s I literally did hundreds of appraisals on REO properties, right after banks took possession of them. So I don’t know exactly what they ended up selling for, but I doubt if many sold at 20 cents on the dollar. I know that some sold at huge discounts in bulk sales by lenders.
I agree with you that 100% financing combined with Neg. Am. loans are a recipe for disaster. I’m anticipating a large number of foreclosures in the next several years also. My point was that not a large numbers of borrowers with ARMs will have their properties foreclosed on. A 12% foreclosure rate, or 1 out of 8 seems quite high to me. My wife and I sold a home this past winter, and downsized quite a bit on a new home. We could have paid cash, but got a 10 year IO loan. We qualified for a 30 year loan on a 800k house, but we still bought just the 800k house.
