From last Friday's "Real Estate Chat" with Maryann Haggerty, the Washington Post's Real Estate Editor.
Arlington, Va.: I know you like to say that you don't have a crystal ball, and I respect that, b/c none of us do. There has been a lot in the news this week about the mortgage mess and how prices are going to drop, etc. I know that prices have dropped before (in the mid 90s), but have prices ever dropped 30-40 percent in history? A lot of prognosticators are saying that when all is said and done, prices will have dropped 30-40 percent from the peak 2005 prices. Is this in any way realistic do you think?
For some background, we were ready in 2004 to buy a house, but we got out bid on every house we put an offer on (one in 2004 and two in 2006). We are now very glad that we didn't buy, and as far as I'm concerned, we can wait some more (and save more for a down payment while we're waiting) but I just don't know if the 30-40 percent drops are possible.
Maryann Haggerty: Maybe during the Great Depression. But no study either one of the two of us has ever seen has found a prolonged drop that steep, even in California in the early '90s...
Now, an individual house, that's another story. If you overpaid for it, it could very well drop a lot.