There isn’t a housing problem everywhere in the USA, just in parts of it where the greedy got too greedy.
A $99,000 house in Texas is still a $99,000 house. That same house was over $300,000 in California, and has now deflated back to $200,000 -still overpriced in my opinion- but what ever downward adjustments continue to happen in those over inflated regions isn’t going to cause a nation wide recession, no matter how hard these Marxist anti American economy moonbats “pray” for one.
All it’s going to do is cause a severe drop in sales for the “get rich quick on real estate” paid tv advertisers, all of which have seen their wealth in assets suddenly disappear, replaced by big payments with no way to dump their holdings.
True.
But does truth even matter anymore?
I would love to believe the housing bubble was only local and will not drag down the entire US economy. I just don’t believe it.
This bubble and collapse in housing are both nationwide. This link shows a map of per capita foreclosures by state...
http://static.seekingalpha.com/wp-content/seekingalpha/images/foreclosure_rate_heat_map.png
The more red the state, the more foreclosures. You can see form the map, that Texas is actually experiencing more per capita foreclosures than California.
So back to your original hope that the housing problem won’t cause a nationwide recession.
What is growing the economy? 70% of our growth is on consumer spending.
Why is the consumer spending? They are not spending increased earnings. They are spending increased debt. They are borrowing and spending.
When the consumer stops spending, 70% of our economic growth is immediately in trouble.
Well, spending on homes has ground to a halt. Spending in general is way off. Profits at Lowes and Home Depot dropped due to the collapse of housing. Profits at Walmart and other discount stores are following suit. Consumer confidence is dropping and the last several years of rampant consumer spending is at risk of grinding to a slow pace.
Much of our nations strong consumer spending, fueling 70% of our economic growth, came from pulling equity out of homes with 2nd mortgages or by refinancing. Rising prices stimulated that borrowing. Now, falling prices mean people are not feeling so rich and not inclined to tap that equity. Some people either borrowed form their homes or bought near the peak, and now falling prices means they have little or no equity to borrow.
This is not good. A nation wide recession is possible and is likely. This will not be confined to bubble regions only. It is going to affect the nation.
