It’s like the Battle of the Half Full/Half Empty Thinkers. Somewhere in between probably lies the truth.

First, we had an investor-driven transaction bubble in housing. There were 48%
more houses built since 2005 than should have been built, if you were simply
looking at trends.

As a related issue, I find it interesting you’re blaming the housing bubble primarily on investors. Investors in what? Real estate? Mortgage lenders? Home builders? Also note - the graphs you included didn’t display. — Bryan Ellis

What that means is there are 3.5 million homes we have to work through. Now, that
means that the 8-900,000 homes that we’re now down to building a year, is going
to end up going down to 400,000. It’s going to take some time to work through
those excess homes - for the prices to drop enough that people can go in and buy
them or rent them. We are probably talking 2011 before we finally work through
this housing crisis and get back to a normal market where housing contributes
significantly to GDP growth.

Sales activity is probably going to correct another 30 percent. That’s not fun. By the
middle to the end of this year, sales are going to be really low. As a side issue, those
of you who like to invest in real estate and actually want to own a home to rent are
going to have some good opportunities.

I don’t know if your numbers are accurate, but assuming that they are: Your analysis is somewhere short of complete. While you do state there will be some good opportunities, the blanket statement that “sales activity is probably going to correct another 30 percent” is, if correct (which I doubt) quite highly likely to be a strictly local experience. Quite a number of markets are already appreciating and real estate sales volume is up in several decimated markets. The point is that there isn’t going to be a “national” real estate market analysis that’s worth referring to, as it appears more and more clear that most of the intense weakness will be localized in a few specific areas, and most everywhere else will be flat and/or begin appreciating. — Bryan Ellis

Let’s look at the credit crisis very quickly. We vaporized 60 percent to the shadow
banking system, the SIVs and CDOs, the people who actually bought US mortgages,
who bought student loans, who bought credit cards, who bought car loans. That’s
gone and it’s never coming back. As we’ll see, it’s going to take well into the next
decade for us to create a completely new infrastructure to replace the broken one. It
took decades to get to where we were last year. I don’t think it will take decades to
recover, but it’s going to take five, six, seven years. That means things are going to
be difficult if you want to borrow money. Credit spreads are going to be wider; it’s
going to affect you more. By the way, if you’re in business, if you’re paying more,
it’s going to put pressure on your profits.

That’s the beauty of the free market, isn’t it? Strain frequently begets creativity and new opportunity! — Bryan Ellis