With the Dow down 40% this year, is it really a surprise that the driver of this downturn—real estate—could end up down 30%?

We've seen trillions of dollars in lost wealth through the stock market, and Matt is shocked (not shocked, shocked! like I am) that the real estate market may see a lopping off of 30% of its market value when the dust settles and a bottom is found. For the part of the market that is most responsible for all the pain we're feeling right now to show that kind of drop really should not be surprising.

After all, the real estate market is (as Matt notes) highly leveraged and extremely susceptible to the credit issues which have plagued financial markets. And with more unemployment and more defaults probably in the offing, a further downturn in real estate prices at this point and in this landscape are about what I'd expect. And ultimately, it's all necessary to again make our real estate prices and our economy reality-based.

Early this week I was asked, as I've been asked repeatedly by friends and relatives, what I thought the market would do. Being an index guy, I don't make it my business to do a lot of market prognostication, but even a monkey (and Bobo, our staff chimp wiz confirms this) can tell you that we are not anywhere near out of the woods.

So I've been saying, yeah, I think it will go below 8,000 (the Dow) and easily could go below 7,000. All indicators continue to point down and toward panic, which again is my indicator that we are in the vicinity of a good place to make sure that you're invested and well placed down here. Barring a second Great Depression, there is not that much further down to go, and if there's a Great Depression, we'll have bigger problems. So, scaling in and getting everything set in your long-term plan is going to look like a genius move, most likely, in 20 years.

But in the meantime, it will be slow and painful moving ... so brace up and get used to that. We are living through tough times. I know I'd said to not look at the market, but I love those Dow snapshots:

Dow Jones Industrial Average

As of Nov. 19, 2008

DJIA, down 427.47 points, or -5.07% to 7997.28

• Biggest point drop since Nov. 6
• Biggest percentage drop this month, since Oct. 22
• Down eight of the last 11 trading days
• Off -16.91% over the 11 day period.
• 10^th biggest point drop this year
• 6^th biggest percentage drop this year
• Lowest close since March 31, 2003
• Hit an intraday high of 8504.64 at 10:15:46
• Hit an intraday low of 7987.08 at 15:59:38
• Off 6167.25 points, or -43.54% from its record close of 14164.53 hit on Oct. 9, 2007
• So far this month, it is down -14.24%. In October, it closed down -14.06%.
• Year-to-date, it is off -39.71%

By the way, for those of you who had NO IDEA what the IGY reference was in my blog from yesterday ... In my best Dennis Miller obscure cultural reference, it alludes to the International Geophysical year, a pie-in-the-sky, Jetson-esque look to the future. It was referenced in a Steely Dan song with the same name: I.G.Y.