good chart...MSM are joining in chorus to suggest that the slowdown will last another 1-2 quarters..by 2007 summer, that may be revised ultimately to more depressing level.

Make that Freddie Mac's MBSs. More or less the same thing.

Good point, CR.
I'm thinking this time wiil undershoot the mean and go to the bottom of the trough, just like always.
The drop could slow down so much that it only drops to the mean, but that would need a very long cycle (not to undershoot the mean).

Average Joe:
a little rant from safehaven for you>

And I must admit, to the average Joe out there who just stumbles through life simply reacting to the next stimulus in front of his nose, all this talk about a 'grand reckoning' at some point in the not too distant future must seem a bit overdone considering it never arrives. And let's face it; whether it be a six-pack of beer or a six-pack of Champaign, either is still well within the means of most Joe's right now, even though it may have to be put on credit. So, in the words of Bugs Bunny, we cannot blame the average Joe for asking, 'what's all the hubbub about?' What's more, conformists would say you alarmist types are nothing but 'fear mongers', preying on the frailties of the paranoid because my life is good. I have a job, I have credit, and I'm living well. So what you talking about - boy?
link below:
Safe Haven | When Fiction Meets Reality

No, we expect nothing too provocative, just slightly cautious, but Long Term Optimistic.
calmo | 12.08.06 - 6:51 pm |

LTO is fine - even I am, despite GW, PO, etc. But just because there are daisies on the next hill doesn't mean there isn't shit on the road.

Just checkin bailey (and of course, channeling your steam).
Is ron right about Bugs Bunny? Jimminey, I thought the little I knew about TV was about Disney, so maybe things have changed since 1960...Bugs used to say "What's up Doc?", but not any more I guess.
Everything else sounds good ron.

My money is on a recession starting mid 2007, and housing prices in the hot markets reaching a bottom in 2008 or 2009.

Per International Money Fund 2003 Year Book

In a study across 14 developed countries from 1970Q1 to 2002Q2 there were 20 housing price crashes recorded. A housing price crash was defined as a 14% or greater housing price contraction. The average contraction was generally around 30%, and they generally last 16 quarters.

So IMO the best evidence based on the broader data sample is a 4 year downturn.

The above noted source is on the web as a pdf, but the IMF website is down at the moment. It is an exceptional resource for looking at the effects of "bursting bubbles" and relatively easily searched for.

Average Joe,

I think you're 6:42 post was the most honest attempt to see "something different" I've seen in a long time. It at least suggests the possibility that it's possible, but it doesn't go very far in indicating it is any more likely.

Your first point may be the biggest and best of all possibilities, but I just don't think all the other average Joe's have all that much in their 401(k)/457's/403b/Roths. I think the typical under-40 is supposed to have less than $10K.

On the other side of the issue is the massive loss of capital should home prices actually decline. I know everyone talks about prices stalling, but I think there are plenty of markets where they can fall substantially (10-20%) and a few where they can fall dramatically (30%).

If a decline does occur, you also have to consider the vicious cycle scenario, negative psychology has a momentum all its own.

Should that happen, there would not only be a significant loss of capital, but a lot of it may be capital that has been, for lack of a better term, "reinvested."

As with the VAST majority of bear predictions, hurricane force conditions disapate before landfall and the dire consequences never materialize.

I do, though, love to read meticulously justified and uber-graphed reasons as to why the earth should be rotating in the opposite direction.

It is exactly the new risk ignorance that makes things different this time. As Clemens is so often quoted; "History doesn't repeat but it does rhyme." Let's see, what does the current housing market most resemble? For my money the stock market of the 1920s. The rules on margins and such that resulted were precisely the rules we've repealed in the housing game.

the one thing that worries me most is the "new instruments" assetions. We just don't no how hedging and risk assignment is going to work until it is tested. Really. Calpers tinks it has only 7% of its portfolio in real estate but does it have any banking or insurance interests? And speaking of inssurance in 2004 who ould listen to a gloom and doomer crying that hurricane insurance was priced way too cheap? No one because we hadn't tested the new model and the insurers were making so much money with the payments in their reinvestment arms. Bottom line is we don't know who is at risk and that makes tthings worse ot better.

Housing prediction 2007 Los Angeles

After Jan 1--inventory spike lasting through summer

Sales down concomitant with inventory spike

Foreclosure explosion (a prominent Bev Hills RE agent told me she has 60 REOs right now)

Fall 2007--Writer's guild/actor's strike over digital revenue (guaranteed--I know the prez of the WGA--knives being sharpened 24/7) LA economy takes huge hit

Comps hammered all year

Also rise of the ZESTIMATE as a real force in negotiations--if you are over your zestimate as a seller be prepared to sit...

In square foot terms, prices fall 10-15% nominally, 15-20% real money

thanks for playing

I see dryfly testing his swatter: C'est magnifique!
Thanks ron for restoring some confidence in my somewhat seasoned recollections of Bugs Bunny.

dr. strange, would you say that the seduction is never consummated with the Fed, unlike the financials where it is an ongoing orgy?
As some far-sighted poster remarked here or close, those who are interested in pricing risk are not your usual customers, your usual consumers, your ordinary workers whose wages are tabulated by the BLS. Nope, these people are beyond risky business. They'd rather sign up for Iraq duty than face that. It B true and oh so sad.
But I digress: the speculators are few and far between, but the care the Fed took eventually raising the rates from 1%, demonstrates (so sadly not to everyone) just how important these speculators are.