As I've said before on these threads, the gov't will step in. Never mind the rhetoric spewed by others about gov't's job and small gov't and no hand outs...that'll all be conveniently forgotten when folks start losing their homes.
However, the really bad part will be how many jobs will be lost. I'm not talking about just the construction trades, but also real estate brokers, mortgage brokers, guys that work at Home Depot, people who work making stuff for homes, truckers, etc. etc.
And then there are the assorted losses through stocks, like Home Depot and the Reits, etc.
This could be a bad one. A lot worse then just opening the 401k statement to see how much you lost.
If the govt steps in with more help than low interest rates then that would be dangerous. It'd create a moral hazard and set up the conditions for the next bubble. Most people won't have to give up their homes, just their dreams of a fast buck. In the late 80s the UK went through a period of widespread 'negative equity' - a term that will soon be tripping off the tongues of many Americans - but its economy still held up.
And for those posters who'll no doubt hate me for waiting smugly for the crash...I don't see that what I'm doing is any worse than hoping for continued house price inflation that will price our children / grandchildren out of the market.
This is not a once in a liftetime opportunity, and there's no window about to close. In 10, 20, 40 years from now there'll still be 20-something couples buying first homes at reasonable multiples of their annual incomes, not living in mobile homes or taking out 60-year mortgages. To expect otherwise is to be asking to be slapped by the market.
The homes that are going to be lost (if you've read the article) are the second and third homes and the speculative homes. The government is not going to bail out the speculators. Even if they wanted to, (and they don't) class envy would never allow it to happen. Where did this talk about people LOSING homes come from? Certainly not from the article.
However, the really bad part will be how many jobs will be lost. I'm not talking about just the construction trades, but also real estate brokers, mortgage brokers, guys that work at Home Depot, people who work making stuff for homes, truckers, etc. etc.
Look, there is a houseing GLUT now, and when (and if) the speculators take a bath there will be a bigger glut. People take advantage of that to trade up. Real Estate brokers jobs are safe (disappointing really, they rank right behind lawyers in my book). People who buy homes like to fix them up, people wanting to sell homes like to fix them up. People have figured out they can do this work themselves. Home Depot is safe, and untill the Railroads get way more efficient and customer friendly, truckers are safe.
Calm down, get back on your meds.
Yeah, then the used car market will be flooded with Lincoln Towncars and pawn shops with imitation Rolexes ;-)
And not in the way you might think. When Bank of New England went under the government did step in. They called all the 'under performing loans' and thousands of people lost their property.
What is an 'under performing loan' you might ask? When the value of your property goes below the amount of the loan. You don't even have to be one day late on any mortgage payment and they can call your mortgage. They took thousands of homes and had a big yard sale. Some people did very very well! Some people never recovered.
My brother (securities licensed) was talking in the early 1990's about all the money that was going to change hands when the baby boomers parents started kicking off, and the fact that the boomers will apply the money differently than how their parents did.
He said we would have an incredible boom until about 2008 aproximately). I asked him what would happen then. He said it would prabably get pretty "ugly."
But hey, it was almost 20 years away! Why worry!