Several readers suggested a topic on acceptable home prices. "I’m curious as to what people feel are reasonable home prices, you know, at what price range would they jump in (and do they expect to see those prices)? I’m sure west coast folk would consider much higher prices reasonable than I would in the Philly `burbs (and much, MUCH higher than a midwestern dweller would). But I struggle with what I think is reasonable (because I’m ultra-conservative and frugal [not cheap)."

"I’m particularly interested in the following categories: 1) condos (non-luxury); 2) townhouses (non-luxury); 3) starter SFH."

One replied, "I don’t expect prices to go back to 1999 prices, houses were probably undervalued then, and there’s been a lot of inflation since then. 2002 prices would be fair value."

"Then again, the sheeple have pushed this thing so far that a mass foreclosures are practically inevitable. So maybe 1999 prices will return."

One was brief, "I don’t care so much about the absolute price, but I’m looking for 1997 valuations (on annual rents) or lower."

One had a formula, "I’d say 10x annual rents is a pretty reasonable valuation, it also corrects for the differential between Philly burbs and Urban San Fran. You probably should adjust that valuation for specific cases that are more unique (for example, the homeowners tax credit in DC probably means that a DC home will be worth a slight premium to other markets based on rents)."

Another looks at percentage terms, "IMHO the realtor who said a while back a 15-20% decline was probably reasonable may not be too far off. The problem is greed. If a 600K house drops 20% to 480K, so many speculators would jump back in the market and new ones would enter you would have the same bidding wars you had a year ago. I am amazed that so many people have so little concept of risk as evidenced by the number of speculators and flippers still buying properties everyday."

Another countered, "I think it may be more accurate to say that people will want to jump in. I think that there won’t be enough people with the means and credit standing to be able to buy all the property that likely will tumble."

"If it were true that they would have jumped on based on greed, then why would they not have done it before 2002-3?"

One reader concurs, "I agree, there are not many qualified buyers remaining that can buy at these prices and interest rate. The remaining first time buyers would need the low down ARM loans. If the interest rate goes up to 7% that knocks out alot more potential buyers because of these high prices. Thanks to a high speculation market alot of people got pushed out from being able to buy. The speculators won’t be able to sell to the first time home buyer or the locals. The greater fool can’t even buy."

"The flippers will not jump in again if the prices go down to 2002 /2003 levels because so many of them will lose money going down."

One notes buyer anxiety, "There may be some speculator activity but I think normal market psychology will take over. People usually do not buy into a falling market. They buy in a rising one and sell on the downturn.'

One couple looks at historic measures. "My wife and I are looking for a return to the mean. I don’t know if it’s a 25% or a 60% decline. What we want to see is a rent to price ratio that is within the historic average and an affordability index back to what it was for the past 100 years before this bubble."

Five more also look at rents. "5-10% premium to own over rent. I have got a long way to go, my rental is currently 71% more expensive to own than rent."

"Should actually be cheaper to own than rent, why else would rentals exist?"

"I’m no RE shill, but I can see paying more to own the place you live in, as even modest rent inflation will take care of this descrepancy soon enough. (But of course, the 300% differential between renting and owning my current rental is completely ridiculous)."

"Exactly, when I bought my first house it was much cheaper to own than rent. BUT I had to prove that I was a good with my finances and responsible enough to make the payments AND have the money to also keep up the property for the bank. The gatekeepers were very strict back then and your reward for jumping the hoops was lower monthly housing costs, in the form of PITI vs. rent."

"In my case with this forumula, prices need to drop by 75%. Renting at $2000, Purchase at about $1M."