Friday, September 16, 2005

Price Appreciation Predictions for 2006

Here are my five categories of price appreciation / depreciation for 2006, for the bubble markets.

  • Category 1: No Slowdown. Continued double digit price appreciation.
  • Category 2: Slowdown. Continued price appreciation but in the above inflation to 9.99%
  • Category 3: Stagnating Prices (aka flattening prices) 0% to inflation price appreciation.
  • Category 4: Mild Price Declines. -0% to -5%
  • Category 5: Significant Price Declines of greater then 5%

Most realtors and bankers are saying that in 2006 prices change will be in Category 1, 2 or 3. However, we are more likely to see Category 3 or 4. Inventory is building in the bubble cities. Houses are sitting. Speculators are getting worried. Fear is more powerful then greed. In 2006, stagnating prices and price declines will be the norm in the bubble markets.


  1. No doubt, at least in San Diego it will be a Cat 5. A few cities are already cat 4's and there are some cat 5's. As for OC and LA counties they are about 6 months behind San Diego.

  2. My wife and I were considering some houses in Tucson, AZ. One was $323,000 and was interesting. We came back two days later and was told the price was now $365,000! Not wanting to be the "greater fools", we of course stopped looking then. I think (or at least hope) many others will also reject such "bubbling", and prices will stagnate or go down.


    Hey, you're famous!

  4. Currently in Brevard County, Florida, I see condo prices ranging from a weak 2 to a lot of signs of a 4. PRedictably, the 2's are long-term-owned properties and the 4's typically are flipper-owned.

  5. Grats on the NYT mention!

  6. Thanks for pointing it out. :-) We bloggers are taking on the cheerleaders in the RE industry.

  7. I think your loss predictions are too mild, at least for California, given the large gains in inventory. Where I live--Marin, N. SF Bay, we've already seen reductions for individual homes approach 10%--and this is just the beginning. Chase the market down!