[Eugene]

Here’s my theory.

Typical deflation period of a speculative bubble is 3 years. That’s approximately how long it took NASDAQ to deflate (Feb ’00 to Sep ’02). That’s how long it took DOW to deflate in the beginning of the Great Depression (Jul ’29 to Apr ’32).

Entry-level houses don’t form extended bottoms. People get married and have kids all the time. Demand from new homebuyers is always there, as long as the price is right. Unlike in the 90’s, we’ll have a lot of must-sell supply from all the foreclosures. Low tier will quickly fall to 2001-2002 prices and switch to modest growth as soon as early 2009, in accordance with the 3-year rule.

Coastal/move-up market is in more trouble. Demand for move-up houses will progressively get worse. People who bought in 2003 and later will not be in any shape to move up. Many will get foreclosed upon and end up locked out of the housing market for a few years. In 2009-2011, 5/1 and neg-am ARM resets will flush the remaining holdouts.

Massive numbers of foreclosures will occur throughout 2008. After the foreclosure, you have to wait 3 years before you can get a FHA loan. In 2011 we will see a surge in demand from people who abandoned their houses in 2008 and chose to rent rather than leave the state.

[Eugene]

Here’s my theory.

Typical deflation period of a speculative bubble is 3 years. That’s approximately how long it took NASDAQ to deflate (Feb ’00 to Sep ’02). That’s how long it took DOW to deflate in the beginning of the Great Depression (Jul ’29 to Apr ’32).

Entry-level houses don’t form extended bottoms. People get married and have kids all the time. Demand from new homebuyers is always there, as long as the price is right. Unlike in the 90’s, we’ll have a lot of must-sell supply from all the foreclosures. Low tier will quickly fall to 2001-2002 prices and switch to modest growth as soon as early 2009, in accordance with the 3-year rule.

Coastal/move-up market is in more trouble. Demand for move-up houses will progressively get worse. People who bought in 2003 and later will not be in any shape to move up. Many will get foreclosed upon and end up locked out of the housing market for a few years. In 2009-2011, 5/1 and neg-am ARM resets will flush the remaining holdouts.

Massive numbers of foreclosures will occur throughout 2008. After the foreclosure, you have to wait 3 years before you can get a FHA loan. In 2011 we will see a surge in demand from people who abandoned their houses in 2008 and chose to rent rather than leave the state.

[Eugene]

This time is different from the 90’s. 90’s boom was a period of rapid appreciation (10-20% per year) followed by a slow decline (5% per year). This time seasonally-adjusted Case-Shiller graph looks almost symmetric.

[Eugene]

This time is different from the 90’s. 90’s boom was a period of rapid appreciation (10-20% per year) followed by a slow decline (5% per year). This time seasonally-adjusted Case-Shiller graph looks almost symmetric.

[Eugene]

This time is different from the 90’s. 90’s boom was a period of rapid appreciation (10-20% per year) followed by a slow decline (5% per year). This time seasonally-adjusted Case-Shiller graph looks almost symmetric.

[Eugene]

This time is different from the 90’s. 90’s boom was a period of rapid appreciation (10-20% per year) followed by a slow decline (5% per year). This time seasonally-adjusted Case-Shiller graph looks almost symmetric.

[Eugene]

This time is different from the 90’s. 90’s boom was a period of rapid appreciation (10-20% per year) followed by a slow decline (5% per year). This time seasonally-adjusted Case-Shiller graph looks almost symmetric.

[Eugene]

In UTC, 325k buys you a 1000 sq.ft. 2-bedroom condo that will rent for $1500-1600.

[Eugene]

In UTC, 325k buys you a 1000 sq.ft. 2-bedroom condo that will rent for $1500-1600.

[Eugene]

In UTC, 325k buys you a 1000 sq.ft. 2-bedroom condo that will rent for $1500-1600.

[Eugene]

In UTC, 325k buys you a 1000 sq.ft. 2-bedroom condo that will rent for $1500-1600.

[Eugene]

In UTC, 325k buys you a 1000 sq.ft. 2-bedroom condo that will rent for $1500-1600.

[Eugene]

Note: edited my numbers to be more grounded in reality.

San Diego median household numbers are skewed downwards for two reasons. First, many wealthy people don’t live in San Diego proper. Second, poorest families and households don’t own homes. Median homeowner incomes are higher than median household incomes.

http://factfinder.census.gov/servlet/DTTable?_bm=y&-context=dt&-ds_name=ACS_2006_EST_G00_&-CONTEXT=dt&-mt_name=ACS_2006_EST_G2000_B25119&-tree_id=306&-geo_id=05000US06073&-search_results=&-format=&-_lang=en

Median owner-occupied household income for San Diego county in 2006 is $78,150.

[Eugene]

Note: edited my numbers to be more grounded in reality.

San Diego median household numbers are skewed downwards for two reasons. First, many wealthy people don’t live in San Diego proper. Second, poorest families and households don’t own homes. Median homeowner incomes are higher than median household incomes.

http://factfinder.census.gov/servlet/DTTable?_bm=y&-context=dt&-ds_name=ACS_2006_EST_G00_&-CONTEXT=dt&-mt_name=ACS_2006_EST_G2000_B25119&-tree_id=306&-geo_id=05000US06073&-search_results=&-format=&-_lang=en

Median owner-occupied household income for San Diego county in 2006 is $78,150.

[Eugene]

Note: edited my numbers to be more grounded in reality.

San Diego median household numbers are skewed downwards for two reasons. First, many wealthy people don’t live in San Diego proper. Second, poorest families and households don’t own homes. Median homeowner incomes are higher than median household incomes.

http://factfinder.census.gov/servlet/DTTable?_bm=y&-context=dt&-ds_name=ACS_2006_EST_G00_&-CONTEXT=dt&-mt_name=ACS_2006_EST_G2000_B25119&-tree_id=306&-geo_id=05000US06073&-search_results=&-format=&-_lang=en

Median owner-occupied household income for San Diego county in 2006 is $78,150.

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