Phoenix, Vegas, Miami, Sacramento, LA, Tucson, Naples, Tampa, .... there's gonna be some bubble cities, those whose economies were based on housing speculation, mortgage fraud, REIC jobs and homebuilding, that are gonna see economic collapses straight out of '29.
Even if (and when) the Fed lowers rates to 0% (hello, Japan!), it won't matter. When home prices soared 100% for ABSOLUTELY NO REASON in these cities (as incomes and rents remained flat), well, it takes a 50% haircut to get us back to reality. And look over there, right on schedule, here comes reality, and it's cold, and it's hard.
Two top US economists present scary scenarios for US economy; House prices in some areas may fall as much as 50% - Housing contraction threatens a broader recession
US homes may lose as much as half their value in some US cities as the housing bust deepens, according to Yale University professor Robert Shiller. Meanwhile, Martin Feldstein of Harvard University says that experience suggests that the dramatic decline in residential construction provides an early warning of a coming recession. The likelihood of a recession is increased by what is happening in credit markets and in mortgage borrowing. Feldstein says that most of these forces are inadequately captured by the formal macroeconomic models used by the Federal Reserve and other macro forecasters.
“The examples we have of past cycles indicate that major declines in real home prices — even 50 percent declines in some places — are entirely possible going forward from today or from the not too distant future,” Shiller said in a paper presented last Friday at the Federal Reserve Economic Symposium in Jackson Hole, Wyoming.