Housing Market Will Crash 50% by 2010

[powayseller]

I’m fascinated by the level of anger generated by my reliable forecast that housing prices will fall 30-50% by 2010. It’s just a bubble reverting to the mean. Isn’t it obvious that will happen? Yet, we’ve got plenty of company among the Delusional Dreamers.

Why are you mad at me for stating what will happen? If you are easily upset, don’t read my posts. Take some valium first. Sell your house, and get over it.

Most important, think about why you are so utterly upset by the statement that housing will drop 50%. If you really think I’m wrong, just blow me off. If I said bread would cost 50% off next year, would you be upset too?

If you get mad, please identify your reason for getting mad, so I can learn more about buyer psychology:

1) You are a homeowner who can’t bear to lose equity

2) #1 above plus you are jealous that you didn’t cash out in time

3) You are a know-it-all, who never wants anyone else to be right

If I’m really so wrong, blow me off. Ignore me.

[Anonymous]

Your prediction of 30-50% is pretty obvious, not sure why people could arugue that it is unrealistic. The reality is today’s prices are completely overvalued, a major drop will simply bring prices back to their real, sustainable value based on income and other fundamentals.

Homeowners who are used to having all this temporary equity need to pull their heads out of the sand and get used to the fact that their net worth is going down big time if they don’t sell their house.

[sdduuuude]

At this point, I’m not mad about the prediction, just mad at how many times you post the same thing.

[greekfire]

Powayseller is the bear’s answer to the bullish propaganda that we’ve been inundated with for the past decade…our Great White Hope, if you will. She’s been doing it for only 6 months now, so she has some catching up to do.

[PerryChase]

I love powayseller, she’s got strong opinions and not afraid to voice them.

People are uncomfortable with her because they don’t like gloom and doom predictions. However, the more they read her, the more they find her arguements convincing. It’s not too pleasant to hear the bad new so you’re tempted to kill the messenger.

Plus anyone who bought after 2001 stand to loose all of their equity if she’s correct. That’s what they’re really scared of.

Actually, powayseller is doing a favor to everyone for telling the truth like she sees it. She’s got nothing to gain. On the other hand, the real estate professionals want to encourage transactions because that’s their livelyhoods so even if they thought real estate would drop 50%, they would never tell us.

I hope some of the reporters in the national press would read this blog, review the data provided, and tell the public what is really happening. People are still in denial so you have to keep on repeating it for the info to sink in.

[bgates]

Cognitive dissonance:
“And I regret that we couldn’t have a civil exchange…like adults.”
“Take some valium first. Sell your house, and get over it.”

May I suggest a 4th reason for your list: I get irritated at your posts because you can’t seem to even imagine the possibility that you could be wrong, and you are convinced the only reasons someone could disagree with you are fear, jealousy, or ego. It’s incredibly condescending.

The financial sector has a lot riding on the housing bubble. Do you think it’s impossible for that industry to come up with something clever and/or evil that hadn’t occurred to you?

I say this as a lifetime renter who hopes prices drop like a stone, by the way.

[powayseller]

Oh, the financial sector that lost $7 trillion in the stock market, and the Fed which “allowed” it to happen, has the ability or power to save the housing market?

Hmmm, which financial sector has ever kept any asset bubble from reverting to them mean? Let’s make it an easier question to answer: which sector of any kind,financial or otherwise, has prevented an asset from reverting to its mean?

Why didn’t this financial sector prevent the S&L crisis or the LTCM collapse? While the markets in general were bailed out so there would not be a systemic collapse of the financial system, no individual investor was bailed out.

It will be interesting to observe the Fed’s response to the recession. Probably they’ll cut rates like crazy, but it won’t help. It will be like pulling on a string; there is no further debt the American consumer can take on.

BTW, you think I’m doom and gloom, you should read Roubini, my favorite hip and cool economist.

[sdduuuude]

At some point, we just have to say “I think is is 25% and you think it is 50%, lets meet up in 5 years and see.”

The horse named “Powayseller’s 50% prediction” is dead and still receiving the pummelling of its life.

[sdduuuude]

PerryChase –

I don’t dislike Powayseller. I think she is an excellent researcher.

[anxvariety]

PS, I like your image and your posts.. but I can see why people would resist it.. No one really knows exactly what will happen.. but a good question is why do you care what they think? Why must you shove it down their throats.. it’s almost like you don’t seem satisfied until you witness them barf some back up.. Who cares whether someone agrees? Are you really trying to save them, or do you need people to agree with you to feel right?

Why not make the prediction 47% or 52%.. I think people are going to be a little line shy if you toss around a number as round as ‘50%’.

Your approach requires people to agree before you stop.. you’re relentless which is good in some ways, but beating the same dead horse can’t be healthy for you… I believe your audience will expand with a more Rich like approach.. he doesn’t go around attacking dissidents, he puts together the evidence and lets the reader decide.

I like you.. but I can sort of see where some of the people that get frustrated with you are coming from.

[no_such_reality]

-62.45% Real Money (-55.2% nominal)

Okay, That’s my new prediction. Here’s the math.

Median 2005 Home value was $591,000.
Median family income in 2005 was $62,900.

Correcting to base financing and sustainable cash flow. Meaning requires 20% down, current 7.5% rate and max 30% of gross income for PITI.

Future median home value $221,916. PITI = $1572.

Allowing for 3% annual inflation and 6 years of correction, our 2012 targeted home price is $265K. A 55.2% nominal drop in prices.

There, it’s on the table…

Does anybody find it surprising that the PITI number corresponds to what the payment is with exotic loans?

[PD]

Does anybody find it surprising that the PITI number corresponds to what the payment is with exotic loans?

This is a very telling statement.

[capeman]

“Does anybody find it surprising that the PITI number corresponds to what the payment is with exotic loans?”

That has to mean the absolute peak for squeezing the last drops of juice out of the lemon. I’m very interested to see if the psychological aspect of the bubble will cause a neutral weightless effect on sales. There should be a momentary point of ultimate historical all-time low sales (towards 0 but obviously not really 0 sales) bringing on the major velocity of price shedding in the local market. What do you think?

[SD Realtor]

PS I do agree with your forecast entirely and am never angry with your posts! I hope you didn’t take our posts in the previous thread as anything more then a simple difference of opinion. I do feel that as a whole (all of zip codes lumped together here in SD) that 50% is reasonable. In my opinion some will be more then 50% and some less then that. If my statements came off as bullish that was not the intent.

[powayseller]

SD Realtor, I love exchange of ideas and debates. I’m always impressed with people who can do so without losing their cool. In the politics thread, some people really lost their cool, and it happens in housing too. You however know how to exchange ideas. I like that so much! Heck, if I’m wrong, I’ll admit it. I love kicking around ideas to see if someone can show a flaw in it.

I have provided my research for the 50% drop in the past. One of my friends encouraged me to make another post about the 50% drop, to counter some of the bullish comments we’ve had recently.

If you have data to show 35%, then let’s hear it.

Rich has a very laid back style. I am much more outspoken than he is. Perhaps some people prefer his style, while some people will prefer mine, and most will like us both. When you are laid back, you don’t ruffle any feathers. I like ruffling feathers, creating excitement, being contrarian. It balances all the BS we’ve been hearing.

I back up my claims with data. I’ve presented the data for a 50% drop before, which consists of reversion to the mean, and a second method which takes median price/per capita income back to a historical ratio of 7.

My new job will involve forecasting. While Rich does a great job laying out the data and problems facing us, he doesn’t do much forecasting. And the forecasts provided by Alan Gin, SANDAG, and Thornberg, are woefully incorrect. Is the forecast a sore spot for you sduuuude?

[Author]

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