You Think I'm Depressing?

I'm not depressing. Now, James Boyce is depressing.

It will start with the housing market which will, once again, be determined by issues like the number of people living in a market, incomes and rental prices.

How far will housing prices fall? To the historical mean, which is another 20-40% down, depending on where you live. This graph is shocking for two reasons. One, how it disproves the basic belief that a house is a good investment, it's not. And second, how we should have seen a correction in 2002, but post 9/11, all we saw was a bubble. Currently prices are down 20% from the top that was shown in this graph, but clearly, they still have a long way to go.

Will housing prices return to historical averages? Yes. But what's going to happen first? Here's the view of Whitney Tilson who was on 60 Minutes on Sunday and one of the few who predicted the mortgage disaster.

"We had the greatest asset bubble in history and now that bubble is bursting. The single biggest piece of the bubble is the U.S. mortgage market and we're probably about halfway through the unwinding and bursting of the bubble," Tilson explains. "It may seem like all the carnage out there, we must be almost finished. But there's still a lot of pain to come in terms of write-downs and losses that have yet to be recognized."

The housing bubble will deflate slowly, unfortunately for our recovery because now people are just pulling their houses instead of selling at a loss. "I'll wait till the market comes back" you here but it's not coming back, any more than lightbulbs.com stock is going to be worth $100 a share anytime again ever.

In real dollar terms, in our lifetime, housing prices will never be what they were in 2005 and 2006. They may never even get within 25% of that false peak. In the next 100 years.

Problem is, I don't see anything wrong with his logic.