We knew this was coming especially South of the Bay Monterey and such where things were way over priced for being so far away from the Bay>>Come on! And now that gas is up and will go up again who wants to pay those prices on just a living wage one can’t!

Yes, exactly! Do you think, yeperinew, that with gas prices this high, that places like Stockton and Tracy will essentially just shut down, with people deserting them to move in closer?

Well, I’m eating my hat. I had predicted after a modest dip, greater Bay Area prices would go back to normal — that is, begin shooting through the roof again. Owning property no longer seems an impossible (American) dream for me. This blog is my new reality check.

Hey, thanks for the good words, Birdie! Prices will be down for some time to come, our astute readers and industry experts say, so you have plenty of time to get your ducks in a row as far as buying.

Do you think the suburbs will become deserted, except for downtowns and areas adjacent to BART, thanks to high gas prices and other factors? yeperinew’s comment got me thinking about that.

If this continues on the way it has been, yes, I do. How will that affect business, I wonder — everyone from suburban retailers to industry (read: employers).

If you’d like to see it all laid out, check out the movie “End of Suburbia” (www.endofsuburbia.com) Basically posits that water, energy and transportation costs and the lack of a decent infrastructure will render the far flung suburbs unsustainable and they will become run down slums. Many areas of rural middle America have demonstrated that path.
I’m not sure I buy it though, once the home values drop enough there is sufficient difference in cost to make the commute feasible, and other options – work at home, a hybrid car, solar panels, remote offices, moving there for retirement… – to keep the suburban lifestyle from disappearing.

Wow, thanks for the reference to “End of Suburbia,” Country Boy. I never heard of it before. That’s a good point you make. Personally, I wouldn’t mind living in the burbs if I could be close to a BART station. How ’bout you?

Birdie, I think many employers are realizing that employees are taking commutes into consideration when they decide where to work. Californians drove less this year, and have been driving less for almost three years now, after 14 years of relentlessly rising gas consumption.

I think prices will continue to decline for a while yet in areas where there have been/are a lot of foreclosures. A lot of these foreclosed properties are not being bought by “REAL buyers” but by “investors” who are starting to rent them out. The net result is that there will be downward price pressure on rentals, thus keeping the cost of buying versus renting out of whack for the time being. We already seem to be back to 2002/2003 prices in places like Concord/Antioch/Brentwood etc. I wouldn’t be at all surprised to see a reversion to 2000 prices there.

OMG, 2000 prices. The mind boggles! Rents are up in many parts of the Bay Area because foreclosed people are now renting, I’m thinking your comment pertains specifically to Pittsburg and Antioch where there are so many foreclosures, yes?

We’ll hit 2000 prices in real (inflation-adjusted terms) by next year.

I don’t think suburban areas will become ghost towns. As prices drop, it will attract people who will continue to drive to work, and employers that will place offices and warehouses out there to lower their own costs. ANd there is all the retail and service businesses that locate close to where people live.

I do think that there may be less new development for a while. What is sad is that there is still a long way to go before the City, Peninsula and East Bay are affordable to a majority of people.

Arggggh, David, that means my house is gonna drop another $40K or so. Excuse me while I go drink some hemlock.

I agree, Bruce, that really is sad! Just goes to show how wildly out of proportion to reality prices were. Seems like *nobody*, except those who sold when prices were high and then moved to a different state, has benefited from this. If you sold when prices were high and bought another house in the Bay Area, you’ve taken a loss!

Look the bay area and south especially around the entire Monterey area (near downtown, Seaside, Marina, Salinas and so on..) were just OVER PRICED! This is good!! Things will sell if owners or sellers really want to sell period. One thing they (sellers) just can’t be greedyyyy anymore. Families, yound smart people and 50s+ really smart are not going to go for this overpriced market. There are so many other cities and towns that will offer what they need!

I am one of those buy at the dip types, and I bought my current house in the early 1990’s during the last big drop. I bought that home for less than the owner paid for it at the top of the pre-earthquake peak in 1989. 13 years later, its happening again and I have been scouring all over the greater San Francisco-Monterey Bay area for a new home to buy. (And thank you Redfin, you are my favorite way to scour

While I do see evidence that home prices are starting to crack from Morgan Hill southward, there is still a lot of unrealistic expectations out there and very, very little activity in homes priced above $600,000. I think these higher priced homes are going to totally collapse soon, and I have seen some interesting evidence in the last 30 days.

Probably the best buys are in Hollister, but it is 50 miles from downtown San Jose, with record high gas prices. You are also 22 miles from the nearest Costco in Gilroy, 30 miles from the nearest Trader Joe’s in Morgan Hill. They do have a Safeway and a Nob Hill and a Lowe’s is planned, but Hollister is really isolated, 105 miles from San Francisco and 20 miles from any other sizable city.

The depth of the US and now Global credit crisis will continue to put downward pressure on prices. Noted economist Nouriel Roubini says that home prices are likely to go down by as much as they have already gone down again in the next 12 months or so, so he thinks we are only half way there.

Here’s a concrete example I can give. A year ago I was looking at a very nice house in the Deer Ridge golf community in Brentwood. The huge, beautiful house was bought for $999,000 in 2006 by speculators planning to flip it for more but then the first credit crunch hit. The house eventually went into a bank foreclosure situation, and the bank wanted to sell it for $595,000 which seemed like a good buy to me, but I have a background in finance and I could see that the credit crisis was not over. So I held back.

Just like the real estate books tell you to do, between Christmas and New Years of 2007 this very fine house received several offers and sold for $590,000. I am sure the owners thought they got a great buy. But this morning I saw an identical model of this house with an even better golf course view priced at $450,000. I wonder if the real estate book formula followers will see their house go into foreclosure again because of the continuing price drop.

This downturn really has legs.

Mark

I thought you all might like to read what economist Nouriel Roubini recently published about the now global credit crisis and what might happen during the next 24 months. So far his earlier predictions have been right on the mark and he is known for his very accurate economic models. Here is the latest list from the Roubini Global Economic Monitor:

Regular readers of the RGE Monitor blog are familiar with my (Nouriel Roubini’s) views. But here below is a detailed summary of the reasons for my views that this will turn out to be the worst financial crisis since the Great Depression and the worst US recession in decades:

* This is by far the worst financial crisis since the Great Depression, not as severe as the Great Depression but second only to it.
* At the end of the day this financial crisis will imply credit losses of at least $1 trillion and more likely $2 trillion. The financial and banking crisis will be severe and last several years leading to a severe and persistent liquidity and credit crunch.
* This is not just a subprime mortgage crisis; this is the crisis of an entire subprime financial system: losses are spreading from subprime to near prime and prime mortgages including hundreds of billions of dollars of home equity loans that are worth little; to commercial real estate; to unsecured consumer credit (credit cards, student loans, auto loans); to leveraged loans that financed reckless debt-laden LBOs; to muni bonds that will go bust as hundred of municipalities will go bust; to industrial and commercial loans; to corporate bonds whose default rate will jump from close to 0% to over 10%; to CDSs where $62 trillion of nominal protection sits on top an outstanding stock of only $6 trillion of bonds and where counterparty risk – and the collapse of many counterparties – will lead to a systemic collapse of this market.
* Hundreds of small banks with massive exposure to real estate (the average small bank has 67% of its assets in real estate) will go bust.
* Dozens of large regional/national banks (a’ la IndyMac) are also effectively insolvent given their extreme exposure to real estate and will also eventually go bust. Most of these regional banks – starting with Wachovia and Washington Mutual – look like walking zombies in the same way IndyMac was.
* Even some major money center banks are also semi-insolvent and while they are deemed too big to fail their rescue with FDIC money will be extremely costly. In 1990-91 at the height of that recession and banking crisis many major banks – in addition to 1000 plus S&L’s that went bust – were effectively insolvent, including, as it was well known at that time, Citibank. At that time the Fed and regulators used instruments similar to those used today – easy money and steepening of the intermediation yield curve, aggressive forbearance, creative – i.e. liar – accounting, etc. – to rescue these major financial institutions from formal bankruptcy. But at that time the housing bust and the ensuing decline in home prices was much smaller than today: during that recession home prices – as measured by the Case-Shiller/S&P index – fell less than 5% from their peak. This time around instead such an index has already fallen 18% from its peak and it will most likely fall by a cumulative 30% before it bottoms sometime in 2010. If a 5% fall in home prices was enough to make Citi effectively insolvent in 1991 what will a 30% fall in home prices – and massive defaults on many other forms of credit (commercial real estate loans, credit cards, auto loans, student loans, home equity loans, leveraged loans, muni bonds, industrial and commercial loans, corporate bonds, CDS) – do to these financial institutions? It challenges the credulity of even spin masters to argue that financial firms are not in worse shape today than they were in 1990-91 when a significant number of major banks were technically insolvent. So, not only hundreds of small banks and a significant fraction of regional banks but also some major money center banks will become effectively insolvent during this crisis.
* In a few years time there will be no major independent broker dealers as their business model (securitization, slice & dice and transfer of toxic credit risk and piling fees upon fees rather than earning income from holding credit risk) is bust and the risk of a bank-like run on their very short term liquid liabilities is a fundamental flaw in their structure (i.e. the four remaining U.S. big brokers dealers will either go bust or will have to be merged with traditional commercial banks). Firms that borrow liquid and short, highly leverage themselves and lend in longer term and illiquid ways (i.e. most of the shadow banking system) cannot survive without formal deposit insurance and formal permanent lender of last resort support from the central bank.
* The FDIC will for sure run out of money as hundreds of banks will go bust and their depositors will have to be made whole given deposit insurance. With funds of only $53 billion, already up to 15% of such funds will be used to rescue the depositors of IndyMac alone. Thus, the FDIC is already requesting to Congress that the deposit insurance premia should be raised to compensate for this shortfall of funding. Too bad that this increase in insurance premia – that should be high enough in advance (not ex-post) to ensure that deposit insurance is incentive-compatible and not leading to gambling for redemption via risky lending in banks – is now too little and too late and is requested when the damage is already done as the biggest credit bubble in U.S. history is now going bust. Also the FDIC has done a mediocre job at identifying which banks are at risk. So far there are only about 90 banks on its watch list; and IndyMac was not put on that list until last month! So if the FDIC did not even identify IndyMac as in trouble until it was too late, how many other IndyMacs are out there that that the FDIC has not identified yet? Certainly a few hundred but such honest analysis of banks at risk is nowhere to be found.
* Fannie and Freddie are insolvent and the Treasury bailout plan (the mother of all moral hazard bailout) is socialism for the rich, the well connected and Wall Street; it is the continuation of a corrupt system where profits are privatized and losses are socialized. Instead of wiping out shareholders of the two GSEs, replacing corrupt and incompetent managers and forcing a haircut on the claims of the creditors/bondholders such a plan bails out shareholders, managers and creditors at a massive cost to U.S. taxpayers.
* Massive amount of creative accounting and other forms of balance sheet window dressing is occurring to prevent banks from recognizing their true losses. First, most financial institutions are putting increasing numbers of assets in the illiquid buckets of Level 2 and Level 3 assets. While FASB 157 should prevent manipulation of the valuation of such illiquid assets, forbearance by the SEC, the Fed and other regulators allows a massive amount of fudging. An insider told me that in a major financial institution the approach is as follows now: top management decide in advance what the announced writedowns should be and folks dealing with the toxic/illiquid assets come up with totally ad hoc assumptions to make sure that such illiquid assets are valued consistently with the decided-in-advance amount of writedowns and losses. This is not earnings smoothing; this is active manipulation and falsification of financial results aimed at creating even more obfuscation of the true state of financial institutions. This obfuscation is actively abetted by the SEC, the Fed and all other regulators that are now in forbearance crisis management stage where the objective is to avoid at any cost anything that may trigger a financial meltdown. Thus, most of these earnings reports are not worth the paper they are written off.
* Additional earnings manipulation occurs in a variety of ways. First, ad hoc assumptions still used to value and write down level 2 and level 3 assets. Second, banks are leaving aside less reserves for loan losses that are much less than necessary; they do that by using ad hoc assumptions about future losses on mortgages, credit cards, auto loans, student loans, home equity loans and other commercial real estate loans and industrial and commercial loans. Reserves for loan losses have been sharply lagging actual and expected losses, thus padding earnings as decided by the financial institutions’ managers. Third, there is disposal of illiquid and toxic assets in ways that misleadingly reduces the amount of actual writedowns. An example is as follows: suppose a bank wants to dump illiquid MBS or leveraged loans that are worth – mark to market – 70 cents on the dollar rather than 100 cents on the dollar. Then, instead of selling these at a price of 70 and showing a 30% writedown these are sold to hedge funds and other investors to a price closer to par – and thus showing in the balance sheet a smaller writedown – by providing a subsidy to the buyer of the security: so a hedge fund will buy such toxic securities at 80 or 90 cents and receive a loan to finance the transaction at an interest well below the borrowing costs for the funds. Thus, writedowns are then shown smaller than the true underlying loss on the asset and the bank finances that fudged transaction with earning less revenues than otherwise on its credit portfolio. This is an accounting scam that auditors and regulators are abetting on a regular basis. An example of such a scam is the recent Merrill Lynch transaction with Lone Start to “sell” its exposure to CDOs.
* The bailout plan of Fannie and Freddie implies a direct bailout of financial institutions and helps them to report better than expected earnings in two ways. First, since these financial institutions hold massive amounts of agency debt the government bailout of the holders of such unsecured debt props the market price of the agency debt (reduces its spread relative to Treasuries) and thus allows financial institutions and investors to report less mark to market losses on the values of such assets. Second, after the bust of subprime, near prime and prime mortgage markets the market for private label MBS is dead with absolutely no origination of new MBS. Thus, today – as senior mortgage market participant put it – Fannie and Freddie are “THE mortgage market” as the only institutions that securitize and guarantee mortgages are Fannie and Freddie. Without the government bailout plan that last channel for mortgage securitization and insurance would be frozen and the ability of banks to originate even prime and conforming mortgages would be serious hampered and its cost sharply increased. Thus, the Fannie and Freddie bailout is actually a bailout of the mortgage market and of every institution that holds agency debt or the MBS issued by the two GSES and of every institution that is in the mortgage origination business. On top of this Fannie and Freddie have also been used as tools of public policy in order to further grease the mortgage market and the banks originating mortgages: their portfolio limits were increased; their capital requirement reduced; and the limit for what a conforming loans – the only ones that Fannie and Freddie can securitize – increased from about $420K to over $720K.
* The Fed has been actively beefing up the earnings and balance sheet of financial institutions in four major ways. First, a 325bps reduction in the Fed Funds rate sharply reduced the cost of borrowing for banks and allowed them to enjoy a nice intermediation margin (the difference between longer terms interest rates at which they lend and the much lower short term interest rates at which they borrow). This steepening of the yield curve is a major subsidy to financial institutions. Second, the Fed has created a range of new liquidity facilities – the TAF, the TSLF, the PDCF – that allow banks and now non-bank primary dealers to swap their illiquid toxic asset backed securities for liquid Treasuries and that provide access for non-banks – and now also Fannie and Freddie – to the Fed’s discount window liquidity. Third, the bailout of Bear Stearns creditors – JP Morgan and many other counterparties of Bear – not only avoided a systemic meltdown and a certain run on the other broker dealers but it has led the Fed to take on a significant credit risk by taking off the balance sheet of Bear Stearns over $29 billion of toxic securities. So the Fed has directly and indirectly systemically subsidized and propped up the financial system and the earnings of bank and non-bank financial institutions. Fourth, a variety of forbearance regulatory actions – starting with the waiver of Regulation W for some major banks – have been used to beef up the profits and earnings of financial institutions and reduce their reported writedowns.
* The entire Federal Home Loan Bank system – another GSE system that is another effective arm of the government – has been used to prop hundreds of mortgage lenders. The insolvent Countrywide alone received more than $51 billion of funds from this semi-public system. This is a system that has increased its lending in the last 18 months by hundreds of billions of dollars: Citigroup, Bank of America and most other US mortgage lenders have also been beneficiaries of this public subsidy to the tune of dozens of billions of dollars each.
* The ability of US financial institutions to recapitalize themselves is constrained by financial protectionism: the only large players that have funds to put at work are sovereign wealth funds, especially from countries that are strategic rivals – not allies – of the US or from unstable petro-states. Thus, the backlash against such SWF will seriously limit the ability of banks and other financial institutions to recapitalize themselves.
* This will be the most severe U.S. recession in decades with the U.S. consumer being on the ropes and faltering big time as soon as the temporary effect of the tax rebates will fade out by mid-summer (August). This U.S. consumer is shopped out, saving less, debt burdened and being hammered by falling home prices, falling equity prices, falling jobs and incomes, rising inflation and rising oil and energy prices.
* This will be a long, ugly and nasty U-shaped recession lasting at least 12 months and more likely 18 months, not the mild 6 month V-shaped recession that the delusional consensus expects. While an L-shaped decade long economic stagnation is unlikely the recovery of the economy from this recession will be weak as the financial crisis and serious macro imbalances will lead to sub-par (below trend) economic growth for years to come.
* The US recession has already started in Q1 of 2008 based on the five indicators tracked by the NBER. The Q2 rebound is only driven by the temporary tax rebates and GDP growth will slip into negative territory from Q3 2008 until at least Q2 of 2009.
* Equity prices in the US and abroad will go much deeper in bear territory. In a typical US recession equity prices fall by an average of 28% relative to the peak. But this is not a typical US recession; it is rather a severe one associated with a severe financial crisis. gThus, equity prices will fall by about 40% relative to their peak. So, we are only barely mid-way in the meltdown of US and global stock markets.
* The rest of the world will not decouple from the US recession and from the US financial meltdown; it will re-couple big time. Already 12 major economies are on the way to a recessionary hard landing. Indeed all of the G7 economies are now entering a recession. While the rest of the world will experience a severe growth slowdown only one step removed from a global recession. Given this sharp global economic slowdown oil, energy and commodity prices will fall 20 to 30% from their recent bubbly peaks.
* The current U.S recession and sharp global economic slowdown is combining the worst of the oil shocks of the 1970s with the worst of the asset/credit bust shocks (and ensuing credit crunch and investment busts) of 1990-91 and 2001: like in 1973 and 1979 we are facing a stagflationary shock to oil, energy and other commodity prices that by itself may tip many oil importing countries into a sharp slowdown or an outright recession. Also, like 1990-91 and 2001 we are now facing another asset bubble and credit bubble gone bust big time: the housing and overall household credit boom of the last seven years has now gone bust in the same way as the 1980s housing bubble and 1990s tech bubble went bust in 1990 and in 2000 triggering recessions. And a similar housing/asset/credit bubble is going bust in other countries – U.K., Spain, Ireland, Italy, Portugal, etc. – leading to a risk of a hard landing in these economies.
* But over time inflation will be the last problem that the Fed will have to face as a severe US recession and global slowdown will lead to a sharp reduction in inflationary pressures in the U.S.: slack in goods markets with demand falling below supply will reduce pricing power of firms; slack in labor markets with unemployment rising will reduce wage pressures and labor costs pressures; a fall in commodity prices of the order of 30% will further reduce inflationary pressure.
* The Fed will have to cut the Fed Funds rate much more as severe downside risks to growth and to financial stability will dominate any short-term upward inflationary pressures. Leaving aside the risk of a collapse of the US dollar given this easier monetary policy the Fed Funds rate may end up being closer to 0% than 1% by the end of this financial crisis and severe recession cycle.
* The Bretton Woods 2 regime of fixed exchange rates to the US dollar and/or heavily managed exchange will unravel – as the first Bretton Woods regimes did in the early 1970s – as US twin deficits, recession, financial crisis and rising commodity and goods inflation in emerging market economies will destroy the basis for its existence.
* Thus, the scenario of 12 steps to a financial disaster that I outlined in my February 2008 paper is unfolding as predicted. If anything financial conditions are now much worse than they were at the previous peak of this financial crisis, i.e. in mid-march of 2008.
* This financial crisis signals the beginning of the decline of the American Empire; over time the relative economic, financial, military, geostrategic power of the US and reserve role of the US dollar will significantly decline.
* This crisis also represents a Crisis of the Suburbian (”McMansions and Gas-Guzzling SUVs”) American Way of Life. The sharp rise in gasoline and energy prices and transportation costs, together with the sharp fall in home prices, will radically change the pattern of living of the typical American household.
* Some of my views are fleshed out in more detail in my recent interview on Barron’s and in the profile article about me recently published by the New York Times magazine.

Mark

Mark, it’s great to hear from you and I really enjoyed your posts, which I will read again and again. Could you please share the URL of the Barron’s and NYT interviews? I’d love to read them! (And thanks for the good words about Redfin, Mark!)

I will probably have more responses as I re-read your comments, but the biggest question I have is, what should an ordinary person do right now to protect herself or himself in case these scary predictions come true? Sounds like jobs will be scarce?

Hi Janis,

OK, here’s the Barron’s link to the Nouriel Roubini interview:

http://online.barrons.com/article/SB121763156934206007.html

Here it is again as a real HTML link. Let’s see if HTML will work in this blog:
Barron’s Article

This is the NY Times article:

http://www.nytimes.com/2008/08/17/magazine/17pessimist-t.html

NY Times Article

More in the next post.

Mark

I hope those links Janis asked for come through in this blog. Not too sure if HTML works here.

Anyway, with regard to the question of what does the ordinary person do should Dr. Roubini’s predictions come true, my thoughts are that there are only three ways out of this mess:

1. Make the debt holders and the share holders eat the $2 trillion losses (!). This would certainly cause the worst recession in my lifetime, but it would also cause resolution of the problem the quickest, I think. I would guess we’d have three really bad years, and then the economy would be cleansed. This is the take your medicine approach and it would be highly unpopular.

2. Japanese style stagnation. Refuse to acknowledge the problem and let the banks and the associated government debt continue on as the living dead. In Japan, the stagnation problem lingered for 19 years (!). To a large degree I think we are doing the American version of ingoring, or more correctly, hiding the problem. The hiding part caused the problem to get worse than it should have (liar loans at all levels of lending), and it also delays rectification because the banks are and associated financial institutions are not acknowledging that they are goners.

3. Have a rousing round of inflation, making $2 trillion look more like $500 billion or less. Yes, this is the Argentina scenario, and, as Nouriel Roubini points out, there are lots of macro factors that make it hard for us to get away with this. Foreign bond holders would definitely not be happy to see the value of their holdings eroded away by inflation, and they have massive market leverage because they own so much of our debt (like China, for example).

So if you are an ordinary Joe, here is what I think you do in each of the following three scenarios:

1. The Great Recession: Hold on for dear life. Cash will be king. If you have a job in some safer industry, keep it. If not, it might be time to make peace with your parents

2. Endless Stagnation: You will have to find some other way to beat the stagnant economy, and your strategy won’t be local to the US because it will be stagnating for the foreseeable future. Invest in some sensibly managed economy somewhere else.

3. Fast Inflation: Flee to the inflating assets. The last time this happened in the late 1970’s, one of the safe havens was, ironically, real estate. But the current situation pretty much negates that. The other hedge from that era is gold, and it has had quite a run-up but it has flattened lately.

None of the above options are very appealing. Although this country is endlessly creative in getting out of tight financial spots, this time I don’t see the way out, but maybe one of you do.

Despite all this, I am a long term optimist. I am still looking for that next house and I suspect it will be out there, probably sometime next year or in 2010, when things really hit rock bottom. But I reserve the right to change my mind as events unfold

Mark

I don’t think HTML works so here are the Barrons and NY Times Nouriel Roubini links in plain text:

http://www.nytimes.com/2008/08/17/magazine/17pessimist-t.html

and

http://online.barrons.com/article/SB121763156934206007.html

OK, one last try for the links Janis requested with plain text. I removed the http:// this time to try and get it through. Also, can someone tell me how to post links on this blog, assuming that is possible?

Nouriel Roubini Barrons article:

online.barrons.com/article/SB121763156934206007.html

NY Times Article:

http://www.nytimes.com/2008/08/17/magazine/17pessimist-t.html

Mark

Mark:
You succeeded with the second URL, the one to the New York Times article. It came across as a live link.
Based on their public remarks, which of the presidential hopefuls do you think might do best handling the horrific crisis foreseen by Dr. Roubini?

Mark, good info. I follow Roubini too. He is undoubtedly known as an outcast by many mainstreamers, but one cannot argue with his record of forecasting. Although very grim, it is quite good!

Good job on holding off on buying that Brentwood house!

How nice to see from you, dg! and thanks! I’m shaking in my boots for fear Roubini’s forecasts come true in their grim entirety.

Roubini has good enough points, but he’s seriously too negative. I’m certainly no housing bull, but long-term price/rent ratios (over the past 30+ years) nationwide averaged about 15 (over 20 in the Oakland MSA). We’re not that far off now, maybe another 10-15% nationwide. Sure we could always overcorrect (in fact it’s likely), but most places have seen 2/3 or so of the nominal price declines.

We’ll have the worst of the 70’s sure–eroding real wages coupled with tightened credit (so that you can’t leverage yourself out of inflation with depreciating debt), but it’s not a great depression. The 70’s sucked, sure, but it wasn’t the ’30’s.

Ah, thanks, David, breathing a sign of relief over here! While you and Mark may differ somewhat on the severity of this downturn, seems like the two of you have stellar records in dealing with the housing market.

Mark, be sure to keep us up to date on how your house hunt goes. My impression is that when you decide to buy, that should be the “go” sign for all of us

hey Janis, thanks for having me.

David, I agree with what you are saying. 2/3 of the way down for the most part sounds about right, as an aggregate anyway. I am still waiting out the coming decline in SF. I love how some people still think it’s gonna hold up! (We are different here in SF!)

Yeah, dg. 4 most expensive words…”it’s different this time”

whoops.

Hahahahaha excellent point! Inch by inch, step by step, price drops work their way in toward San Francisco. When will the market turn? We don’t know when, but we know it will (not that I wish this on anyone, of course).