Many people thought the housing market crash wasn’t coming anytime soon, that prices would continue and continue to rise. I even heard people saying that they had to get in now otherwise they could never afford a house at the going rate. Like any other boom, people forgot to look at the fundamentals.

Well today the fundamentals are right in your face. There’s no escaping them. No Ponzi scheme can save you. CNN has just reported a 6.7% price drop in prices from last year. If you adjust for inflation, that’s closer to 10%! The largest drop recorded since the index began in 1987. It marked the 10th consecutive month of price depreciation and 23 months of decelerating returns. With no end in sight.

I hate to soapbox, but as far back as 2004-2005 I was already suggesting that the market was overpriced. The numbers no longer made sense. It had to stop and prices had to come back down. I even wrote on ways to protect yourself. For example in December 2005 I wrote: The Simplest and Best Way to Protect Yourself from the Real Estate Crash. If you followed that advice you’d be significantly protected from the current housing market crash right now.

Knowing that there was a shakeup coming, I personally prepared. I followed my own advice, I ate my own dog food. For example I locked the mortgage on my personal home at 5.4% for 25 years! Yes that’s a fixed rate of 5.4% for 25 years. I had the option of 4.8% for 10 years, 4.3% for 5 years, or a variable for 3.9% if memory serves me right. Back then when I told people how excited I was to get 5.4% locked for 25 years I was continually shocked by their reaction. They couldn’t believe I was willing to pay that much interest. 4.3% was a lot better. And why not variable, interest rates were low and dropping.

This is when I tried to explain that interest rates can’t keep going down anymore, and definitely can’t stay at those rates. That we were just above inflation. It just can’t stay that way forever. Over time rates have been closer to 8-10%. They would climb back.

I also kept telling people how I didn’t want to be part of the upcoming mortgage refinancing storm. As rates increased people wouldn’t be able to refinance when their mortgages came up for re-financing. Basically the whole house of cards would come tumbling down. This is basically what’s happening now, and why we can expect to see a continuation of this housing crash for at least several more years. At least until the last of the 5 year fixed mortgages that can’t be refinanced dwindle away.

The good news is that unlike what the media portrays, there is an end in sight. It’s just a few years away.

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