Truth to tell, I doubt the correction will include a big chunk, although I think the pace of correction might move relatively quickly for a couple years, starting at beginning of the year.
Looking at past swings, the pace of decreasing markets tends to be a little slower than that of the gains that preceded them. If we look at the slope of our recent spike we can see it went almost vertical between 2003 – 2005. Obviously it won’t track down at the same pace but I think it’s very possible that the pace of decline could move a bit faster than it is doing right now. A 10% or 12% decline in nominal prices doesn’t sound like a whole lot, but if you multiply it by 3 years it starts to add up.
As a number of people have already commented, any home owner who is at all able to hold on to their home will do so. At any rate, they are not the ones for whom we should be fearful. It is the people who cannot hold on who are sitting on a must-sell transaction, whether they realize it now or not.
I think it will eventually come down to the size of the must-sell inventory vs. the size of the pool of buyers. We can see that these two numbers are moving ever closer towards each other every month. I highly doubt they’ll actually meet, but I don’t doubt that the number of must-sells will eventually comprise enough of the listings to drive the pricing for the remainder of the listings.
