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If you look at history it tells a much different story. From records kept back to 1800 you find the following:

Avg correction peak to trough is 4.6 years

Nearly every correction started slowly with an initial downturn, featured a brief suckers rally, and ultimately turned down and continued to fall for years.

Last 3 corrections were 1979-1983, 1989-1996, 2006-2012. 4, 7, 6 years respectively. Add in the <1 year limited downturn in 2001-2002, do the math and what do you get. 4.5 years, right on the average. It’s never different.

The largest declines have always come after the FED begins lowering rates. And if there are no rate reductions this year, you could be correct in the short term.

9 out of 13 recessions since 1960 have been hard landings, where both housing and employment collapsed. And all 9 housing corrections occurred after the FED began lowering rates.

In the 4 times were the housing correction was more shallow, employment did not collapse. In the 9 times housing did collapse reversion to the long term trend line, in real terms, always occurred.

I have no idea what is going to happen. There is too much government intervention for the market to function properly. But to those who tout low mortgage rates I would say this: credit quality and low rates are meaningless if you lose your job.

And to those who tout low foreclosure rates I would say this: 3 years of Covid loss mitigation in the housing market will be unwound. And with some of the programs extended to Oct 2024 (go figure) it will take years to unwind.

Again, I don’t have a crystal ball. But history is not on the side of housing bulls. Employment is the wild card, and NQM and DSCR loans are the hole card. If those things go the wrong way (and for me it’s not if but when) the impact on housing could be huge. But even if I’m correct (and I admit I could be wrong) there will be no housing bottom for years. Like 2026. Or 2027. Or even 2028.

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