We are almost halfway to the 25% mark (off peak prices) in many of these local market segments, and it’s only been 18 months. If you look at the last downturn, the rate of decline actually picked up during the latter half of the downturn. If that holds true 2007 could possibly be just as bad or worse than 2006, and that includes the offsetting effects of a mini-rally this spring, if it occurs. A 25% net loss off of peak pricing goes far beyond any definition of the “new paradigm”, the “soft landing” or even the “new normal” that the permabulls have been trying to sell us for the last few years.
This downcycle will either reverse this spring (and I can see no reason why it would do that), or it will go into an even steeper decline.
Personally, I think it could end up being a 40% or greater decline in value between price decreases and inflation. If one believes in the return-to-trendline and a subsequent overcorrection it could be as much as 60%.
