It won’t be a nationwide crash because it wasn’t a nationwide bubble. There are a lot of markets that have barely moved in the last few years. There are still lots of places in the U.S. where you can buy a home outright for less than $100k. Those markets are in no danger of eminent collapse.
The term “bubble” gets overused, too. I don’t think a market that’s 15% over the trendline is in any danger of suffering a catastrophic collapse. At 25% it would be borderline for some markets and probably only a little painful for others. At those prices, local employment and population trends can dampen the impact to a certain degree.
I think there are enough potential losses to cause real problems for the lenders and the government, but I don’t subscribe to the notion that we’ll become a Third World nation as a result of a correction in real estate prices. Look at Japan – they managed to suffer a pretty long and nasty downturn and I notice they didn’t turn to eating each other.
