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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory

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To: mishedlo who wrote (38202)	8/9/2005 4:15:55 PM
From: anachronist	Read Replies (1) of 110194

Now two questions 1) What is wrong with what I am suggesting? The only hole I can see is that you are assuming that the traits that make your neighborhood desireable will not change during a housing crash. Echo Park used to be the playground of the wealthy Hollywood elite. For many decades, it was a slum. Even if your house is affordable (or paid off) what are the chances that you will still want to live there, and if you don't, will you be able to get rid of it? Not saying this will happen, but its possible. 2) How big a decline do you think we see and in what areas? Perhaps Mish is an optimist. I can only speak for California. Assuming income does not decline (median $55,000 household) and prices do not overshoot to the downside (as they always do in a crash), you would expect the median house price to be $200,000. That's a 60% decline. Not totally out of the realm of possibility since those are the same prices levels we saw here in 1997-98 (IIRC). Personally, I think it will overshoot. I also think that by the time it bottoms, no one will want to live in California, and no one will care about real estate prices anymore. BWTFDIK, IJADAB.

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