How Far Will Housing Prices Drop?

I've always maintained, since 2002, that housing prices would fall 75-85% from top to bottom.  This is an "on average" number and it will vary across regions.  We're already seeing some properties on the market in Florida being offered 75% below their peak valuations.  Some areas will see 90% declines.  You can assume ownership of homes in Detroit by taking over the real estate tax liens, and you can probably negotiate a big reduction in the liability. 

But don't take it from me, take it from the late Sir John Templeton, one of the grandfather-figures of the mutual fund and modern investment industry (I would like to thank my friend and colleague "Jesse" of Jesse's Cafe Americain, who dug this up after I reminded some people of Templeton's comment):

Sir John also had a few words about debt — a four-letter word that folks seem not to care about: “Emphasize in your magazine how big the debt is. . . . The total debt of America is now $31 trillion. That is three times the GNP of the U.S. That is unprecedented in a major nation. No nation has ever had such a big debt as America has, and it’s bigger than it was at the peak of the stock market boom. Think of the dangers involved. Almost everyone has a home mortgage, and some are 89% of the value of the home (and yes, some are more). If home prices start down, there will be bankruptcies, and in bankruptcy, houses are sold at lower prices, pushing home prices down further.” On that note, he has a word of advice: “After home prices go down to one-tenth of the highest price homeowners paid, then buy.”

Here's the link to the source for that comment - which was made in an interview with Bill Fleckenstein back in 2003 LINK.

We are edging into the next stage of the popped credit bubble/financial system collapse.  The $23 trillion in direct and indirect support flooded into the system since September 2008 by the Fed and Treasury has prevented total devastation.  I expect that we'll start see some form of QE2, a further extension and expansion of the homebuyer tax credit program and other goodies which will enable the Big Banks to continue sucking wealth from the Taxpayers via Tim Geithner and Obama's policy implementation.

The next leg down will probably be the most painful for everyone because those who are either clinging to the comfort of denial or are hanging on to their home/job/savings by a thin thread, will be brutally affected by what is coming.  It's still not too late to unload your home if you have an equity cushion in it and there's still time to accumulate gold and silver before another big move higher - a move that will take many by surprise and shock everyone else who still disparage gold as a "barbarous relic (John Maynard Keynes)."  It looks like the only thinking that is barbaric are the theories derived from the originator of that phrase...Got Gold?