Is a 50% correction feasible?

[femto]

Just happened in . What's your worst case prediction for Seattle? Could we go back to 1999 prices?

[biliruben]

This market will decline for the next 5-10 years. Maybe 5-10% real prices a year. Prices are too sticky. We won't see such a dramatic decline all at once.

[sniglet]

I predict we will see a drop of between 50% and 80% in home values in the Seattle area within the next 8 years. If Manhattan can see price drops of 40%, and commercial real-estate can drop 80% in Florida (1990 to 1993) then I don't see why a 50% drop is out of the question in Seattle.

Particularly when one considers that we have an unprecedented credit bubble that has lifted real-estate prices around the globe. As the bubble unwinds lenders are going to be in a whole world of pain that won't be ameliorated by regional variances (i.e. every country and region will hurt). This will make credit harder to get than water in a desert.

Just look at the greater than 25% of Seattle area homes that now have exotic mortgages (e.g. 100%, option ARM, etc). The vast majority of people with these loans get them because they can't really afford their home. This is completely off the charts. Prior to 2000 exotic mortgages made up less than 2% of the market. As a result, you can't even compare the precariousness of our situation with previous Puget Sound downturns.

Things are going to get NASTY.

[mike2]

What, is this poll designed exclusively for the Bears? How is our resident Bull supposed to vote with no +15% option?

[femto]

I can't imagine there's anyone whose worst case scenario is really +15%, but if you really want to vote for that I'll add it in.

[EconE]

Realistically I could see A 25% fall but I think that will be for new construction as the builders build existing homeowners underwater. The existing homeowners won't lower their prices much more as selling would involve bringing a hefty check to the table. After the initial set of rate resets in the next two years it's anybody's guess.

For the people that see an 80% decline in prices...well...I think that if that happens you may be "jumping for joy" about being able to buy an affordable house again...however, IMHO, I think that an 80% fall would put our society at such risk that I'm not sUre I would want to stay around.

[Jazen]

Bill Gross said that either housing must come down 20% or the Fed must drop rates 50 points, I can't find the link to the article. But it may be floating around on a previous post I made.

[Jazen]

Oops guess I was wrong. Here is the article, mortgage rates need to drop, not the Fed rate.
Sorry.

So, since we ain't gonna see mortgage rates decline that much any time soon, guess what has to happen? 20% decrease in home values.

[Alan]

[george]

[Eleua]

[Eleua]

[finance]

[SeattleMoose]

[Eleua]