Read John Mauldin's letter 3-23-07

Here is the linkhttp://www.2000wave.com/article.asp?id=mwo032307 , and this is portion that shocked me:

Now That's Cheap! I can hear you say, "It can't happen, John. Who would sell a home for less than 50% of what it cost?" So, let's go to the second story, courtesy of Dennis Gartman (see more on him below). Instead of my telling the story, since he's the far better storyteller, let's see what he has to say under a closing headline of "Now That's Cheap": "Knowing when something has gotten cheap is an art reserved to either the very wisest among us, or the very lucky, or at times the very stupid. It is not an art we are given to, although clearly we have some acquaintance with the latter. But sometimes even we can know when something has gotten cheap.... even very so, and it would appear that housing in Detroit, Michigan has gotten very, very cheap. Allow us to explain. "We were sent an article yesterday from Yahoo! News detailing the levels to which housing prices in Detroit have fallen, and they have fallen very far indeed. Apparently last week, a Texas auction firm was commissioned to sell off a number of homes there. The prices were unbelievably cheap, with 'house after house [selling] for less than the $29,000 that it costs to buy the average new car.' The auctioneer became so exercised that he enjoined the audience with the simple statement that 'Folks, the ground underneath the house goes with it. You do know that, right?' Several houses that went by the boards sold for less than $10,000... some even for less than $7,000. As one participant said, 'You cannot even buy a good used car for that!' "He's right. One gentleman, who a year ago thought he was buying a series of 'bargains' when he paid $70,000 for a number of houses, only to watch as houses of the same relative value in the same neighborhood sold over the weekend for half that. The gentleman in question apparently was not prepared to average down. "Sadly, these 'bargains' are not only in seedy, run-down depressed portion of the city. We read where a house in Bloomfield Hills, an area of the city we've been to several times in the past two years and is really very, very nice indeed, which had been listed for $525,000 sold for $130,000! Five years ago, at $525,000 the house was a bargain; at $130,000 it is even 'bargain-er.' However, when nice, tidy, small houses begin to sell for less than the price of a nice, tidy, used car, either cars are expensive or houses are inexpensive... or both. Now, how do we do the arb?"

Although this is only anecdotal it portends serious consequences. When I was a youngster in the 1930s depression I recall that my parents who lived in a high rise apartment house in the Bronx were afraid to spend $1500 for a foreclosed house that had been built in the 1920s at a cost of over $120,000. They were afraid not just of the comparitive cost of ownership vs cost of renting, they were afraid that the depression was a permanent condition and that the events in Europe were a precursor of war.