Comments on: 2007 Year in Review: Subprime Explodes, Prices go Negative, and Captain Credit Crunch Enters the Sea of Housing.

By: RDuarte

RDuarte — Thu, 03 Jan 2008 07:00:53 +0000

Well, I have been reading your articles for a year now and have never left a comment. I just wanted to say that I’ve learned quite a lot about real estate, market dynamics, credit and so on that I was unclear about before finding your blog. Also, the comments that your readers leave have been insightful as well. Keep up the good work.

By: ojc

ojc — Wed, 02 Jan 2008 16:54:54 +0000

Great summary of the year, Dr. HB. As usual you are right on the money. You’ve mentioned this already, but I think it’s worth repeating: the #1 reason we’re in this mess is the widespread delusion that we’ve entered a “new economic paradigm.” This was the mentality that contributed to the bubble. The worst part about it is that even the so-called experts seem to believe it. It’s arrogance to belive we’ve somehow invented a foolproof way to take on more and more debt without a corresponding increase in productive (not speculative) economic activity.

By: Debbie Beukema

Debbie Beukema — Wed, 02 Jan 2008 10:51:52 +0000

Wanted to say thanks for your fantastic blog. You have kept me informed and entertained. Have a great 2008. -Deb

By: keith bjorkman

keith bjorkman — Wed, 02 Jan 2008 07:01:22 +0000

Prices will lower to 3X income, the tried & true for many, many decades.
70% decline for California, 78% decline for SF. 40% nationwide.
That is reality, that is the bottom. Although in a bubble collapse, prices decline below the long-term mean for a few years. So be prepared.

Keith in SF.

By: Arthur in WeHo

Arthur in WeHo — Wed, 02 Jan 2008 03:29:17 +0000

My prediction for 2008 is as Sylvester Stallone said in Rocky III: Pain.
The year over year down turn in prices with building inventories and looming foreclosures means 2008 will be a year of modest housing pain, leading to 2009 the year of panic as the next wave of resets lands on top of a faltering economy. With whole communities upside down (owing more than their property is worth) the bottom will drop out of the market in 2009. Only a massive increase in nominal per capita income, i.e. inflation can avoid this. This would require the Fed to switch from fighting inflation to deliberately stoking inflation in a desperate bid to avoid deflation. It could happen. Bernanke is familiar with the Japanese parallel and the Fed study of a few years back that traced BOJ policy failures as contributing to the deflation of the 1990’s. Like the Japanese, I predict the Fed will act too late. 2008 is the last year to prepare. The question is do we prepare for Fed induced inflation or property bubble bursting deflation? I’d put the odds favoring deflation at 3:1.