By J. Fairbank
Chris Thornberg of UCLA and others have presaged the collapse of the housing market as far back as the boom boom days of 2002. Perhaps, they were wrong in when the collapse would take place. (Staff at the Fairbank Group correctly predicted in 2004 that 2006 would be the year, and it was!) But their logic, housing price increases at rates not supportable by prevailing salary and wage increases, was indisputable.
Yet, people who had no business buying condos and houses, recklessly bought by playing with OPM (Other People's Money), and now the proverbial chickens have just begun to come home to roost. Although Fairbank Report analysts have projected up to 20% housing price downturn, I project a larger decline because people, as late as 2005, were buying properties at 10 to 15 times their annual household income! And the Greenspan Federal Reserve Bank sat idly by, refusing to crack down on dangerous subprime (read junk) loans!