Housing Prices May Over-Correct

Not to let anybody down, but given the bad taste the housing crash has left in people's mouths, not to mention the sub prime market more or less prematurely wiped out younger home buyers who would be in the market for a house today, if they hadn't been bankrupted 3 years ago, I don't think we're going to see a return to a "bottom" we're going to like.

Demand for housing is going to be less than its traditional long term average. And now you throw banks in there who are a bit gun-shy (not to mention collapsing) and it's a pretty good formula for housing prices to drop below their long term average.

Additionally, it pays to compare the US housing market to that of Japan's almost 2 decades ago. You think we've had a drop in prices now? Japan's housing has never recovered, going from a house to income indexed ratio of 120, to almost half that today.


If the Japanese housing market is any kind of portender of things to come, if we link the US chart to the Japanese chart to project the US housing market, prices could drop significantly more than what we think they will;


Roughly, 40% MORE from what they've dropped already. The median house price in the US would go from $220,000 (2007) to about $130,000 by 2023. Of course that's only if we're stupid enough to do what the Japanese did and bail out their economy to the tune of a trillion dollars and keep dead companies afloat at the expense of the tax payer...oh wait.