Archive for January, 2009


January 13, 2009

It is generally agreed that housing is a significant contributor to the current economic crisis. Many have said that the credit bubble can not be deflated and the consumer can not return to spending until housing prices stabilize. Others have said that recovery will not be sustainable until the housing market bottoms. I have heard so many people offer opinions (watch CNBC) that the housing market will bottom in 2009 or 2010. A few have offered an opinion of a longer wait. I have not seen a comprehensive discussion of the factors involved in the housing shake-out, so here goes. I hope it’s not a case of “fools rush in where wise men fear to tread.”

There are three aspects of the housing crisis: Falling prices, mortgage defaults and supply issues. They will be tackled one at a time, although they are related. Falling prices increase mortgage defaults, which throw foreclosed houses onto the market, and thus the inventory glut is increased. Additionally, there is a section analyzing the demographics involved in the current housing cycle, which are different from the previous cycles since 1950.  To continue, click on the following link: