FED finally admits we're in for a correction. Thoughts?

[Nathan Gesner]

https://www.ksl.com/article/50...

I'm no smarter than the next guy and nobody knows the future. But my common sense tells me you can't increase housing prices 50% or more in two years and expect them to stay there. I predict we'll see prices drop 20-25% from their peak in many markets.

Thoughts?

[Russell Brazil]

Can we stop just throwing out ridiculous numbers out there? Can we use some perspective and do away with the hyperbole.

20-25% drop in prices would be a range that is slightly worse than the housing collapse 15 years ago to dramatically worse....as that drop was 19% from peak quarter to bottom quarter. If we measured the yearly averages instead of quarterly peak and trough, it was a 10% drop. That 19%/10% drop nearly destroyed the world economy and nearly sent us into a 2nd Great Depression. So saying 20-25% is suggesting something even much worse that what happened from 2007-2011.

So you're saying with your prediction that we are basically going to be entering the next Great Depression. 

Or what is more likely? What are the current risks in the economy right now? Is deflation a force we are currently fighting?....or are we in a high inflationary environment from the 50% increase in the money supply since the Spring of 2020.

What happened the last time we had such a big increase in the money supply which occurred under the Nixon administration? High inflation...just like we are experiencing now. The loose monetary policy in 2018 and 2019 was predictably going to lead to this...then the 2020 money supply increase threw gasoline onto the already burning fire.

So after the same thing happened in the 1970s after home prices rose 200% in just a few years under these conditions, what happened next? They rose another 100% in a couple years, til the rate finally slowed to 10% rises per year in the 3 year run up and following peak interest rates. Think about that, at the highest interest rates ever recorded, the yearly rise in home prices, after slowing substantially, are in line with the rise in the last 3 years. What we are saying is an unsustainable rise in prices, would have been the slowest rise in prices during the 70s to early 80s high interest rate/high inflationary envorment.

Inflation is a pretty easy concept when you dont try to complicate it.

“Inflation is always and everywhere a monetary phenomenon, in the sense that it is and can be produced only by a more rapid increase in the quantity of money than in output.” - Milton Friedman

Inflation isn't going to reverse itself. It can be tamed, but the clock doesnt turn backwards. For the last 122 years there has been 1 force that forces prices on real estate down in any significant amounts...and that is a lack of availability of credit/debt. It happened in the Great Depression when banks were failing left and right. It happened during the Savings and Loan Crisis 60 years later when all the S&Ls failed. Then it happened during the Financial Crisis 20 years after that, again when the banking system was collapsing. Unless there is an unknown banking crisis on the horizon, it's just wishful thinking by investors hoping prices drop so they can buy more and PTSD from the Financial Crisis, which is just recentcy bias.