To better answer the topic question, you’d have to define panic. Is it a run on the banks? Is it that everyone wants to sell and no one wants to buy? Does everyone buy/sell their stocks, and put the $ in a mattress?
One thing I’ve noticed from past cycles, and the past few years, is it always gets worse than generally expected. People’s expectations are typically based on what just happened, not what happened the last cycle and not what the data suggests, which is where us Piggingtonians differ. There’s another thread on here with the article that outlines the sentiment during the ’89-’96 downturn, and you could all but replace the years and averages with current ones.
I think the recent past sets an expectation of leveling prices, but we know they will drop more than most expect. As they do I think people will panic. But panic and do what? My first thought is they won’t buy. As demand wanes, prices/values will drop more. Throw into the mix the effect of rising foreclosures, tightened standards, and the reamining new construction that is still finishing, prices have nowhere to go but down.
20% decline? Maybe in a year from now, and maybe again a year from then, but it will vary from area to area, and buyer to buyer.
I believe most people won’t want anything to do with housing as an investment a year from now and several years thereafter. People will start saying “wait to buy, prices are falling.” I think many of the flippers, investors, or shoddy agents/brokers affected by this will panic, and move onto new careers/investments. For the homeowner it depends if they can afford their home. For the renter, I think they start to feel more comfortable not owning, and delay a decision to buy even longer.
