An interesting article from Fortune/CNN: The market in San Diego is described as a “dead zone”.
“Under those conditions one likely scenario is that housing prices would drop 10 percent to 15 percent in the bubble zone over the next 12 months, then remain flat for maybe four more years while incomes catch up.”
The article states,”For the past few years the housing boom has driven the economy, adding jobs in construction, remodeling, and real estate services. And consumers gorged on the equity in their homes, taking out a total of $2 trillion via loans, refinancings, and sales over the past five years.
Those powerful stimulants, which added a full point to annual GDP growth, will soon vanish. If corporate spending or some other force doesn’t come along to pick up the slack, we could go into a recession that would cut income growth to zero. Then inflated housing prices would have to shoulder the entire, wrenching adjustment, falling 30 percent or more over several years.”
I’m curious – just how bad does everyone think it could get? What exactly would happen? People talk about pain, but what exactly do they mean? Does anyone have any scenarios?
And could the government help stimulate corporate spending? If so, how?
What potential “other force(s)” are there to stimulate the economy?
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