The data being reported at the state and county level speaks of an unfolding disaster many, many times larger that what is being reported on TeeVee. There are daily updates of housing related media links here and here (both excellent sites) for those that care to read more, so I won't go and deeper into the gory details.
My opinion is that the housing crash that is now before us will last far longer and be far worse than is commonly recognized. If we are lucky, the housing market will bottom in 2010-2011. When all is said and done I expect as much as a 90 percent price crash in some markets and an average of 40-50 percent across all markets. I see nothing in the trajectory of this housing bubble to suggest a reason to suspect it will play out any differently financially or psychologically than any other bubble in history. In short, it's NOT different this time. It's very probably the same. If, however, we're unlucky, housing, retiring boomers and peak oil will press their serious demands upon a concurrent stretch of the future and housing will never reclaim the peak seen in 2005.
Please not, especially, where I added emphasis. Note also that the author, in the article linked above, has linked to several newspaper and business journal stories. The Poughkeepsie, N.Y., newspaper, for example, had a story with local real estate analysts predicting a 40-50 percent drop there, before the dust all shakes out.
In other words, this could be the biggest thing since the 1979 Iranian oil embargo, if not since the Great Depression, in a worst case scenario.
As in Japan, part of the reason a crash could be so long, and so painful, beyond the degree of overvaluation of housing, is the size of the ripple effect:
The first-wave victims of the housing bubble implosion are tapped out and must begin their lives anew with statistically no savings. I suppose that means they will no longer be buying flat-screen TV's, new trucks or trinkets for a while. And you know those Mercedes-driving, $700 purse-toting realtors, loan brokers, appraisers and title company folks? They'll be hunkering down for the foreseeable future, too. How about the subprime, predatory and other assorted, irresponsible lenders and mortgage "securities" dealers? I imagine they've stopped buying original Monets and Picassos at this point but, hey, I'm just guessin'.
All together now - can you say, “drag on the economy?” All of this - and it's really just beginning - is only going to make matters even worse.
This could be far, far worse than the 2000 dot.com bubble, in other words.
Take note that the subprime crunch is already hurting the used housing market in many metropolitan areas. On the new house side, in Detroit, home of the car, you can buy a repoed house at auction for less than a Motor City new car.
Next, new housing stock one level above subprime will be hurt. Mortgage brokers will have so much bad money on their hands they'll be trying to figure out ways to get it back. Once this happens, smart buyers will stand pat and let them sweat.
And, we haven't even talked about home equity loans yet.
How many subprime borrowers had held their houses long enough to get somebody to give them a home equity loan? Probably not a lot, but those major metropolitan area 20-30 year old used home owners?
A whole lot of them, I don't doubt. If the subprime crash is driving their house values seriously downward, they've got new trouble on their hands.
That, in turn gets back to the second quote I have above. If you have to refinance a home equity loan, that means less spending money. That affects jobs at Best Buy, Home Depot, and a Chili's or similar restaurants.
There's a waggish saying that Americans can't handle or face more than one crisis at a time. Well, old dogs may have to learn new tricks.
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