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Originally Posted by pocketkangaroo
I will read up on his stuff, he seems interesting. I don't follow the housing market outside of the areas I live in. I just can't foresee housing dropping 20-30% in the parts of Chicago I am in. I mean I've seen some places drop a little off their asking price, but I'm still seeing condos selling left and right around here.
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Sure, there will be regional variations on property values PK, and some areas may not feel any effect. But.. the overall, when looking at the economy, means 1000's, probably millions of people will have additional pressure to support home payments - and less money to swirl around in the marketplace. It's a vicious cycle and when it starts and it's very hard to stop.
There was a survey done of ARMs (think the article was printed in Barron's mag) - where it revealed a substantial number of folks already have negative equity in their homes (can't remember the exact percentage), and it would only take a drop of 15% on real estate values (as at May 2007) to result in over 50% of ARM mortage holders running negative equity to the tune of $1.4 trillion. This may be fine if you think of a home as a home and not an investment to gamble with - and suspect in the long term these people will be fine - they just have to ride the storm meantime.
The current trend still appears to be downwards on the home market and an increasing volume of "home stock" on the market for sale. Developers, least probably most, have dumped a fair amount of their raw land stocks earlier and battening the hatches for the storm, but suspect some will hit the dirt irrespective.
Bob Shiller is actually very good at his stuff - and sometimes comes up with shocking results. Unfortunately, a high percentage of his conclusions have since come true - and some were fairly obvious when you dig under the surface. Due dilligence by banks was often done by a blind banker
