As a mortgage consultant for 11 years, I expect to see prices rebound this year. It a trend that happens ever 5 years or so. The only difference this year is the option arms and adjustables caught everyone off guard.
Marc, I understand that you have developed price expectations based upon your observations over the last couple of decades. I went to the Wharton School and worked as the president of a mortgage company.
You completely FAIL to understand the underlying dynamics of the chaos within the financial marketplace today. The housing price speculative bubble of the past two decades in California is OVER. And it is contributing to the COLLAPSE of the global financial system.
The bubble was fueled in large part by FOREIGN CAPITAL. The foreign capital was generally available due to sustained, ongoing massive balance of payments defecits. This created large pools of unused or otherwise underemployed dollar denominated liquid capital overseas. Through a process called disintermediation, the global financial system finds ways to move capital from capital surplus areas to capital defecit areas. Large pools of foreign capital reentered the United States through the sale of mortgage backed securities and other collateralized mortgage and debt obligations. This FULED the UNSUSTAINABLE SPECULATIVE BUBBLE.
The sub-prime crisis represents the culmination of this speculative bubble!
IT IS OVER MARC! IT IS TIME FOR CALIFORNIANS TO GET REAL JOBS DOING SOMETHING PRODUCTIVE. FOLKS ON THE LEFT COAST CAN NO LONGER LIVE OFF THE REFINANCES OF OVERPRICED PROPERTIES AS THEY SPIRAL EVER HIGHER. THIS WAS NO MORE SUSTAINABLE THAN THE TULIP BULB BUBBLE (1636–37) OR THE SOUTH SEA BUBBLE (1720). [See for example, http://en.wikipedia.org/wiki/Tulip_mania and http://en.wikipedia.org/wiki/South_sea_bubble ]
This is NOT a new phenomenon. Try reading Extraordinary Popular Delusions and the Madness of Crowds (1843), by Charles Mackay.
Did you ever stop to wonder about the sustainability of price inflation which would have priced even Bill GATES and Warren BUFFETT out of the market for a 3-bedroom California home by the end of the century??
Californians collaborating with Wall Street have brought about global economic collamity. But this is a SLOW MOTION train wreck!
You will continue to see this play out daily on the financial pages. See for example, YESTERDAY's new insight on Bloomsberg: "Bond Insurers May Lose AAA Ratings Before a Bailout"(January 29, 2008) at http://www.bloomberg.com/apps/news?pid=20601203&sid=ajygNY3Jw0UM&refer=insurance . Or take a look at TODAY's financial news:
UBS Reports Record Loss After $14 Billion Writedown
Merrill to Exit CDO, Structured Credit Businesses, Thain Says
ALL OF THE EXISTING MORTGAGE BANKING INSTITUTIONAL PLAYERS WHICH HAVE FACILITATED THE REPATRIATION OF GLOBAL CAPITAL AND ITS INVESTMENT IN CALIFORNIA REAL ESTATE ARE COLLAPSING, MARC.
THE PARTY IS OVER!
Now it is time to go and get a REAL JOB doing something PRODUCTIVE! There WILL be a chance to repurchase real estate at its REAL UNDERLYING value in three to six years. The really GREAT NEWS is that our children and grandchildren will once again be able to afford to live in California without having to go into drug sales.