Don’t let this graph scare you, but let it sink in for just a moment. It is clear that we experienced an unprecedented real estate boom over the past 8 years, but don’t expect an unprecedented depression as a result. We do expect values to drop, but only to the 130-150 basis level.
Why won’t the index drop lower than 130 basis points? Interest rates are incredibly low, so low in fact, that they really cannot drop much lower at all. Also, relative inventory levels are dropping quite quickly across the country…let’s not forget about a possible home builder bail out in the future through incentives or other means.
We expect a new plateau to be established followed by a period of slow, steady incline over the next several years.
– Chart provided by Bill Marsh with the New York Times