Fly-over country can’t fall to 1 x earnings (Detroit at 2.5 MONTHS x earnings right now)
Investors can always cash flow if they purchase at 2.5 x earnings or less.
Lot prices and building costs can’t come down.
It’s different here.
LJ and Carlsbad are no longer coastal.
SDEngineer has not seen ANY sign of the shadow inventory hitting the market. Its now safe to assume it never will and must simply evaporate into thin air leaving housing values un-affected by the magnitude of its enormity.[/quote]
Detroit is not typical of flyover country, and by suggesting that it is you clearly don’t understand WHY Detroit’s home prices are so low. It is NOT because Detroit was bubble territory (it’s housing prices did NOT experience a bubble during the last 8 years).
The reason why Detroit can drop so low is that it’s been hemmorhaging residents at an unbelieveable pace. The population of the City of Detroit has fallen by half over the past 50 years. There’s a lot less demand for housing there because Detroit only has a population of 900,000 in a city that had enough housing for 1.8 million. There is NO DEMAND for housing. Unless you’ve noticed the population of the U.S. doing the same, you can’t draw a similar conclusion about the rest of the country.
And I’m certainly not assuming the shadow inventory will just disappear – but if they were going to flood the market, they WOULD HAVE ALREADY DONE IT. They clearly have either decided not to, or are simply unable to. And frankly, with the bailouts they’re getting, they have no motive to – they CAN just hold properties and meter them out.
