Is Sacramento Special or Just First in Line?

On Seeking Alpha, Tim Iacono looks back on his 2006 predictions:

In what was the first of what will surely be an annual tradition, 364 days ago predictions were offered up here at this blog. Appropriately titled, Predictions for 2006, it contained a host of prognostications for the year just ended. Let's see if they were any good.

1. The Housing Bubble Will Not Pop

Despite everything that bubble blog readers, writers, and commenters may feel in their loins, there are just too many willing lenders and too many dumb buyers out there. While 2006 homebuyers may hear something about a "housing bubble", it won't register until 2007, at which time, it might register in a very big way.
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Sure, the speculators are going to squeal a little, and in some of the hottest areas, don't be surprised if by the end of 2006 you see year-over-year declines of maybe 10 percent or more, but nationally, prices should be about flat to up a little for the year.

Hit the nail on the head about the willing lenders and dumb buyers. As for price declines - see Sacramento and Sarasota for double-digit declines while nationally, prices are about flat (though it depends on which measure you look at). The housing bubble certainly did not pop in 2006, however it is that you define the word "pop" (unless of course you live in Sacramento or Sarasota).

Tim's 2007 housing predictions:

1. The Housing Bubble Will Pop

When the word "pop" is used here it refers to a 10 percent decline in the year-over-year national OFHEO resale price data - not refinancings, just resales. Others may define the word "pop" differently, but that's how it will be defined here. All the other measures are so squishy that you really don't know what your getting - misleading medians, incentives for new and existing home purchases, and many other factors make it difficult to really assess what has happened using NAR or Commerce Department data.

The popping will not result from the lack of dumb buyers, but rather a dearth of willing lenders. At some point in time, making sub-prime, option-ARM, interest only, 50-year loans no longer makes business sense, and that time will be 2007. There are far too many headwinds going into the mother of all ARM-resets in the months ahead. Ditech.com will not be able to save everyone.

In some areas there will be hell to pay in 2007 - after rising 200 percent or more since the late 1990s you wouldn't think that a price decline of 20 or 30 percent would hurt, but it will.

Speaking of "headwinds," Bakersfield Bubble has been doing a great job covering the subprime lender implosion. (See also: The Mortgage Lender Implode-O-Meter)