Think about it. If every time there was a spike, and the market fell back down to join the slow, gradual trend up wards line that preceeded the spike, we'd only be paying about 60,000 for a house that sold for 17,000 in the sixties. (an average 12,000 sq. ft. 3 brm bungalow)
12,000 sqft??? I guess size does matter and I am behind with my 1,500 sq footer!!! LOL
I tend to agree with you, but I am not totally convinced that the correction in housing prices from the peak in 2005 will mirror prior corrections.
Appreciation was unprecedented. Debt is unprecedented. The use and volume of creative loans like ARMS, Jumbos, interest only loans is unprecedented. The use of 100% and even 120% loans is unprecedented. The extraction of equity as home prices rose through refinancing and 2nd mortgages was unprecedented.
I am really not sure we can model this housing bubble after prior bubbles after the confluence of so many variable that have never occurred before.
If housing flat crashes, I can’t say I will be surprised. I don’t expect it. It sounds like the author of the post does expect it. But I think the plunge in home values will be unprecedented due to all the unprecedented factors I mentioned above. This is just my opinion, but I’m not a voice in the wilderness.
And none of this takes into account the current liquidity crisis due to sub-prime loans, or possible raising of the Fed funds rate to fight severe inflation, which still could come to pass. If mortgage rates go back to 9 1/2%, that is flat going to KILL home values, because it will do the opposite that cheap, easy money did to get people into their current homes. The door will slam on home sales and housing starts, and it will be a long, long time before it opens, if we see mortgage rates return that high. It would be devastating to home prices.
average 12,000 sq. ft. 3 brm bungalow)
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That’s SOME KINDA average bungalow there, Zach! How big is an above average bungalow?