I like what you’re trying to do here. And I agree that there are a lot of folks here who make unfounded predictions throwing out huge % of decline without having a firm argument or explanation of how they quantified such declines.
Maybe those who site the re-setting ARMs & lack of equity can provide a way of applying the impact of these factors. It would be great to hear “3000 SD households or 35% of all current home-owners have less than 5% equity (95% financed), and of this group 85% are facing interest rate reset during 2007.” I would guess this type of info is not available, but if it were we could come a lot closer to having reference data to serve as inputs into your model, and come up with a slightly more meaningful prediction of the housing decline.
BTW, I do not believe that you can compare stock-market busts to our housing situation. Prices are much stickier on the way down for housing. People dump loser stocks pretty quickly – obviously they will not slash the price of their homes in the same manner. Stocks & houses are definitely apples & oranges.
Must-sell housing inventory will certainly put pressure on the whole market, but to what degree really? So many of us are banking on the foreclosures & short sales to drag the whole market down, but what if 90% of the home-owners actually have the ability adjust their personal budgets to hang on and keep their homes for the long haul? They will not sell if they do not have to. Will the other 10% really create a 40-50% in value? I am not so sure.
