One thing that hasn’t been discussed very much, even in this forum, is the effect of deflation in construction costs, in the face of diminishing construction activity.
Certainly, the price of construction materials is being affected. See http://www.randomlengths.com to review the dramatic fall in the price of lumber and OSB panels which has occured in the last two years or so since the peak in U.S residential construction activity. The producers of other construction material, like drywall or windows are also under similar stress.
Likewise, construction employment is also now starting to fall off a cliff, which should also create further deflation in construction costs.
In the face of excess supply of construction materials and construction labor, the cost of new homes will fall. This, in turn, serves to create further downward pressure on the prices of existing homes and further pressure on home owners with little equity. Yikes!
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