BobS
This is a significant study that shows the economic tsunami headed our way. I believe it will have an impact on the markets next week once it gets circulated and digested.
There are many causative factors of this housing decline that will have a self-reinforcing, cumulative effect on each other. It simply will not resemble past cycles in our history, except perhaps the panics of the 19th century.
Unlike past cycles, everyone was leveraged to their eyeballs during the upturn. With no “skin in the game”, no-down and low-down buyers have none of the margin of safety to hang tough in the face of a slight decline in values. As they abandon their houses, thus feeding inventory, prices will fall all the faster.
Burned lenders will run away from writing loans, as is already becoming apparent, thus lessening the demand side for buyers.
This article shows the extent to which financial institutions, as required by their accounting rules, will overreact in their withdrawal from participation. It’s going to get bloody.
