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We definitely saw some crazy over-inflated housing prices, and we're now seeing a correction in many markets, but we're not going to see $400k houses dropping t

We definitely saw some crazy over-inflated housing prices, and we're now seeing a correction in many markets, but we're not going to see $400k houses dropping to $40k nationwide. Not even close. You might be surprised by what you see if deflation comes into the equation. Even without, it's not unreasonable to expect a 50 to 80% decline peak-to-trough, given that (1) houses were 50-200% overvalued to start (good morning, Silicon Valley), (2) the economy is in recession, and (3) far-out suburbs/exurbs are likely to revert to ghost towns and ghettos as gas prices inexorably swing up. A decline of 90% is definitely in order for upper-tier Manhattan properties, although in that case we're talking about a haircut from $40 million to $4 million. So, while I think he's optimistic (from my point of view, heh) about the housing crash, I don't find him to be unreasonable.

anamax 18y ago
> 1) houses were 50-200% overvalued to start (good morning, Silicon Valley), How does overvalued by >100% work? If a house was "overvalued" at $1M, will it really become worth -$1M? I'll "buy" as many of those -$1M houses as I can find. Heck, I'll even take -$100k houses.
- vlad 18y ago
  A house worth $1m in 2006, but bought for $3m would therefore be 200% overvalued in 2006. A drop to $300,000 a few years from now in today's dollars (factoring inflation, smarter consumers, banks loaning money only at very high interest rates to reduce their risk of losing money to inflation and being in trouble again, tougher lending standards) would then be a drop of 90% from $3m, or 70% from the "real" price. I've also read a similar post by a blogger who bought a house seven years ago, before the housing bubble, and now his house is worth much less than what he paid for it even seven years ago. His argument is, shouldn't he get bailed out, too? EDIT: here's the post, titled similarly to Peter's article: http://www.wisebread.com/should-we-all-just-stop-paying-the-mortgage http://www.wisebread.com/should-we-all-just-stop-paying-the-...
  - time_management 18y ago
    That was a great post. My shitbag insurance company denied me on several necessary medical services, leaving me with serious (but fortunately, payable) medical bills. Apparently you get bailed out of these sorts of things if you fuck up, but not if others fuck up for you.

anamax 18y ago

> 1) houses were 50-200% overvalued to start (good morning, Silicon Valley), How does overvalued by >100% work? If a house was "overvalued" at $1M, will it really become worth -$1M? I'll "buy" as many of those -$1M houses as I can find. Heck, I'll even take -$100k houses.

vlad 18y ago
A house worth $1m in 2006, but bought for $3m would therefore be 200% overvalued in 2006. A drop to $300,000 a few years from now in today's dollars (factoring inflation, smarter consumers, banks loaning money only at very high interest rates to reduce their risk of losing money to inflation and being in trouble again, tougher lending standards) would then be a drop of 90% from $3m, or 70% from the "real" price. I've also read a similar post by a blogger who bought a house seven years ago, before the housing bubble, and now his house is worth much less than what he paid for it even seven years ago. His argument is, shouldn't he get bailed out, too? EDIT: here's the post, titled similarly to Peter's article: http://www.wisebread.com/should-we-all-just-stop-paying-the-mortgage http://www.wisebread.com/should-we-all-just-stop-paying-the-...
- time_management 18y ago
  That was a great post. My shitbag insurance company denied me on several necessary medical services, leaving me with serious (but fortunately, payable) medical bills. Apparently you get bailed out of these sorts of things if you fuck up, but not if others fuck up for you.