Sadly, I don’t subscribe to the 20 percent by year’s end theory. But, if the market can jump around 10 percent in a month, as it did in some LA foothill towns a few years back, why is a sharp drop impossible?
The run-up was largely due to an abundance of credit and speculation (including fear of being priced-out). The downturn is precipitated by the credit crunch and fear that prices will drop significantly.
I know prices are sticky, but those with a bunch of equity can drop prices hard and fast to pull out, and those without equity might be forced to sell at a loss (short sale or foreclosure).
When you consider $300k homes from 2001 are selling for about $1M, why is a pullback to $800k out of the question?
That is still a very healthy double-digit annual appreciation. (now if I can just convince my neighbors)
