Volume does precede price. Also – housing prices don’t drop like stock prices, there will be a constant drop to the downside. Right now all the marginal properties are taken off the market and the good houses are selling. They are selling at a discount, but not falling like crazy. This takes time. There may even be some price recoveries, and then they will fall again. Look for a LONG TERM drop in price. It could take 10 years or more. With a snowballing effect as the sentiment of the consumer gets darker and darker. Interest rates will be the real killer. I think that should (I think they will) interest rates creep up, perhaps by 2-3 percentage points over the next few (5?) years, that 30 years will go up also to at least 1-2% minimum and that will be a HUGE driver of house price collapsing.
I think that there is somewhat of a house of cards effect and that any large disruptions, oil crisis, war, political effects, food crisis, health scares, terrorism, will be a tipping point to a new downward trend.
Note: I am not an economist, I am generally an optimist. I think though that the country is still tipped toward a non-existent trickle down tax rationale, and that the middle class is being destroyed. The wealthy areas will not be hit as hard (at least the nice properties) and even the poorer properties will be protected because there is so much money in the various expensive towns. The middle class and even heavily developed upper-middle (Carmel Valley) will start to feel the pain in a year or so. The middle end and lower will fail dramatically. Real wages are not going up, but inflation is (true inflation) and the current mind set of the corporations and the government is to keep the high end in obscene wealth.
Consumer confidence is truly the real measure, and there is still the lagging effect and credit crunch. Credit is still open and the crunching is only starting to happen. Major buyouts and mergers are pointing to lower salaries, not employment – but the trend is increasing.
It’s not a good time to be an optimist – optimists get killed in the early stages of a long-term downward trend!
