It's highly area specific, with bad markets leading, and official YoY 2008 to 2009 price depreciation came in at a whopping 32% (add an astonishing 7% depreciation for just the 30 days between June 1 and July 1 of this year, too). Consider also that there is massive dam of 'moratoriumed' REOs that have not been put to market for fear of further depreciating effects, and it's very grim.
No need to imagine because it's not reality. Reality is government involvment. All else is irrelevant to me making money.
Regardless of price, the comment I responded to originally was that houses are not selling; just sitting there without buyers. But that's not true. There are many buyers. Just no buyers that want to pay pre-crash prices (obivously).
Area specific for sure. But the original comment made that I took exception to was that houses are sitting there unsold without any buyers, but that is not true. In many areas, prices have declined so much that there is indeed buyers. Sometimes many buyers. No buyers @ pre crash prices, of course, but buyers nonetheless. And yes, not in all areas, but overall I would say this is the case.
I completely agree there are people buying in certain areas because of what they perceive as relative value. On a strong hunch, I'd venture these are the types who like the area, and plan on staying for a while, and not investors or want-to-be investors, for the most part (though investors with big money for long term carrying costs of real estate portfolio building are in certain areas, too), and can finally afford the house or type of house they've dreamed of being able to afford for a few long years during the past bubble madness. The users who want to live there won't be crushed if they see further depreciation, necessarily, assuming their time horizon is long enough, the area is where they want to be (e.g. close to work and recreational areas, etc.), although they won't exactly welcome depreciation, obviously. The are viewing a house purchase as a quality of life issue, and will risk further depreciation, assuming they can afford the payments and assume the risk of shrinking equity for some time. These people are typically cautious but want, or more likely, need something now, further risks be damned. The one area I'm actually hearing nibbling in is Tennessee. But credit is tight, will remain so as banks and lenders in RE are quite sorry with their massive losses on their books, and the types of buyers that can afford conventional loans (with good FICO scores) or cash purchases is quite limited. The fact that negative equity means non REO properties require sellers to bring cash, sometimes in bulk, doesn't help.
I was just re-reading "The Coming Crash in the Housing Market" by Talbott (published in 2003). He has several examples where it took years for housing to bottom. E.g., after the 1987 crash and 30,000 people were laid off on Wall Street, housing in NYC didn't bottom until 1993. (BTW, he pretty much nailed the crash. If anything it is far worse then he predicted.)
I was listening to a Boy Hoye (Institutional Investors) interview a few weeks ago. He told the story of some big, well known commercial property bought in 1930... the first "dip buyers" later defaulted. As did the 2nd and 3rd.. the property eventually bottomed in 1954. Some of the commercial property in Japan declined 90% after its credit bubble popped.
Yeah, props to Talbott for that well thought out & mostly dead-on book. He alerted me to the mortgage insurers short trade which was absolutely my best trade of '07 (i think). Far OTM puts on specific stocks is something that usually is a sure-fire way to lose but was truly spectacular as the housing crash progressed. The percentage returns were.... astonishing. I only regret that I didn't mortgage my house, make my kids earn money through commercials & sell one of my kidneys so that I could have ridden that lottery ticket to the moon. John T., while I don't agree with your politics 'this one's for you.'
Same old damn problem - too much liquidity. More pain necessary & how better to dish it out than in illiquid assets? Here's my guess on how it goes down: Round 1: January 2008 - "Yay house prices down 10 %! We can finally afford a house!" Round 2: June 2009 - "Now that prices are down 30 % I can't lose on this foreclosure!" Round 3 : 2010 - "all these REO homes are a steal!" Round 4: 2011 - " OMG they just hiked property taxes! These big homes are going for nothingl!" Round 5: 20XX - "What do you mean I've been means tested out of mortgage deductibility? With my marginal tax rate at 40 % I'll never be able to afford this place!" We have enjoyed low taxes for many years. Now, the pendulum swings. Real estate this decade will be the metaphysical equivalent of "Equities in Dallas" for those who get the Liar's Poker reference.