I made my 2008 predictions about this time last year. Some were pretty good, others I might have been early on. I thought the crime rate would already have started to rise but that doesn't seem to have happened (yet). Most of the other stuff I think I did a lot better than most of the so called economists.
I'll skip repeating the silly forecasts that were made by the NAR and the home builders. We all know "there's never been a better time to buy, blah blah blah......). As expected they were all horribly wrong. By the way if you want to read the CAR 2008 forecast it's here, (yup 4% down, oh so close....NOT).
This years forecast is a little foggier. All the government meddling is making it hard to get a grasp on what's going to happen. They usually don't mess with free markets but this is obviously a far bigger problem for them than previous crashes. All that meddling will probably stretch this mess out far longer than I would like.
So on to the magic 8-ball. It sees price declines in the IE of another 20% in the IE in 2009. The OC and LA will see larger price declines, probably closer to 30%. Home building will dry up (like that hasn't already happened). Even building smaller homes it's going to be hard to compete with the REOs. I think we will start to see the larger homes wilt on the vine. Now that the potential for large gains are gone those big homes are just money-pits. The average family doesn't need 4000 s/ft nor can they afford the added costs such homes generate. I think the interest rates will remain low since the government and the NAR beleive this is the best way to halt the price declines. There are arguments both ways, it will help sell homes, however it's very likely to have the opposite effect on prices especially in the long run. I see rents coming down as a result of prices coming down. When you can buy a house in Perris for $120K you sure as heck don't need to get $1500/mo for rent. So as more homes are sold off to investors, expect some competition for those renters and that should bring rental prices down (keep that in mind when looking at investment properties).
The overall economy will continue to erode as job losses widen. Look for the weaker chains to start folding in droves. Don't buy stock in Ghottchalks, Circuit City, Home Depot or Pier 1 to name a few. I forsee a mass culling of nail sallons, coffee shops and high end eateries. The holiday hope is gone. The only thing the new year will ring in is the cold hard reality of a going out of business sale for many of these places.
Unlike some economist (and Tyrone) I don't see the demise of the dollar or the total collapse of our economy. While we may be printing money like mad, so is the rest of the world. Europe and Asia are just as bad off as we are. I think the entire global economy will contract but stay coupled and balanced within reasonable limits. We may not buy as many useless trinkets as we once did, however we still need products. People have to have clothing, food and medicine. It may not be gucci or lobster but there we will still buy stuff.
So there's mine. Lets here yours!