What's happening is actually a very sad thing for America, and the world. Lives will be ruined, economies will be devastated. And why? One word - greed. But the market has it's own way of flushing out destructive behavior - if it didn't it'd be irrational. But it truly is rational, and periods of irrationality are met with periods of rationality.
Makes me wonder - who will be the winners (are there any) during this bust? And who will be the biggest losers?
Here's the article - very good read:
The 20% or greater fall in average median prices on a national basis we foresee is decidedly nonconsensus. And it will have substantial effects at home and abroad. Indeed, even a flattening of house prices will be meaningful.
Furthermore, those many who recently bought second homes and homes for investment (Chart 25) will get quite nervous if house prices stop rising. They've flooded the market with rentals, depressing rents (Chart 26), so even with interest only mortgages, many have negative carrying costs with taxes, interest, maintenance and other costs exceeding rental income. Once their confidence in rapid appreciation fades, their zeal to dump their properties onto the market leaps.
January 16, 2006
Posted by blogger at 1/16/2006