Nice piece, thanks for sharing.

I would suggest the possibility that prices fall at an accelerated rate (not necessarily lower trough, but getting there faster) due to the change in psychology of the general public. In the years leading up to the peak in prices in 2007, and well after, the public was inundated with a never ending tsunami of propaganda that 'Home prices never go down!'. Anyone selling a house during this time heard the same thing from all corners of the industry, not to mention the media. This psychological backdrop simply no longer exists. In a world where the whole population knows darn well that home prices can go down, there will be much more active competition to sell once it becomes obvious in a given area that prices have started to drop. Very interested to see how this develops.

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That's a very good point. Housing market dynamics have a strong "narrative economic" component and people have learned a lot since 2007. I think that you are right that the price declines could be even sharper than I'm currently modeling (though I did amplify each monthly loss by a factor of 1.45... but still reality will probably trend out much differently than 2007/08/09) given that sellers will probably be less "sticky" with their prices once they are sure that the market has turned. Add to that mortgage rates trending up and this decline might be very sharp. I'll keep updating the model as we go along!

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