I think it IS arbitrary to say that prices will decline by x% just because last time around they declined by X%. You have to understand why they declined by X% last time, and then apply the same “whys” to this situation given the different inputs this time around. That’s why I thougth the second approach (returning to a fundamental measurement) made more sense.
“Although it is certainly possible that the drop will be bigger this time, what I’m hearing in the responses so far is just “this time it’s special,” with no strong basis for believing it.”
This boom was way bigger than the 80s boom… so why should the bust not be bigger than the post-80s bust? It seems like common sense; an assertion to the contrary requires backing. The second analysis you did makes more sense because it gets back to actual fundamentals as opposed to an arbitrary percent decline.
The point you completely miss is this: unlike gold prices, home prices have to be in line with wages in order for people to sustainably afford them. The overuse of negam and teaser rate mortgages and the current surge of defaults (as the piper demands payment) proves this.
You can talk all you want about the demise of the dollar, but if dollar-denominated wages aren’t keeping up with home prices, your argument is toast. Unless you are of the “foreigners will forever happily lend money to deadbeat homeowners” school of thought, aka “this time is different.”
On that note I’m calling bullshit that Rich ever said or implied “this time is different” — citation please.
There are lots of other problems with your posts but I’m getting bored already.
