After the housing meltdown and great depression of this millennium, homes will be bought on cash again at a much lower price – the tax advantage will also disappear
Alan Hersey
Apr. 1, 2007

The credit cycle has run its course. The housing bubble has burst. The home prices are plunging at a rate never seen before. Where does it end?

The answer to the question depends on an analysis of home prices. If a home sells for $500,000. The real cash value of the home is around $85,000. That means if there was no tax advantage, if there was not ready credit available to buy the property, the real estate would exchange hands around $85,000 instead of $500,000.

The economy is headed for a depression driven by deflation. After a total financial meltdown across the globe, the credit system will disappear for along time. The massive federal deficit and lack of revenue will create the scenario when the tax advantages of owning a home will also disappear. With no tax advantages, people will not borrow to own properties that decline in value over time.

As a result, before the real estate meltdown is over, the banking and financial services sector collapse will create a scenario when homes will be traded in pure and simple cash. That may require a 85% fall in real estate prices.

What happened to the stock market in 1929 will happen to the real estate market now. After the great depression legislation restricted people to maintain adequate margin in the stock market. The same will happen to the real estate market now.

After the housing meltdown and great depression of this millennium, homes will be bought on cash again at a much lower price – the tax advantage will also disappear
Alan Hersey
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