The truth of the matter is that this "crisis" needed to happen eventually. We've all seen it coming for a long time, and it's finally here. A weakened dollar is necessary, too.
Housing had to go down. (Asking $500k for a 1700 sq ft single-family home or townhome -- a house that would rent for about $2000, maybe even less -- is just nuts. Nothing in the fundamentals supported it, as most people here at EuroTrib have known for much longer than the press.) I think people have gone insane over it because of how "quickly" this hit. The market around my neighborhood -- just outside the Beltway -- is in an all-out collapse, unlike anything seen in decades, from what I'm told. (And this was supposed to be the one city immune to a collapse in the housing market, yet prices here are falling at rates double the national average.) You can drive down a typical street and see three, four, five, even six houses for sale, no doubt by desperate sellers who have yet to realize (or simply won't admit) that it's already too late.
On the whole, it's a good thing. Prices will decline. Consumers will continue to trim spending. Irresponsible companies -- the ones whose bigwigs are apparently on the phone to Cramer nightly -- will go bankrupt. Global imbalances will begin the long process of getting back to equilibrium. Thinking of the big picture, it's difficult to see this as anything but a necessary evil.
It's going to be a painful experience, but, even if it leads to recession (and I say this as someone who, as a low-level employee, could lose his job in such a scenario), it's not going to be the end of the world. And it should serve as a much-needed wake-up call to Americans: Take away the Baby-Boomers' credit cards, Social Security and Medicare now before they sink the whole damned ship with their psychotic spending habits. And incorporate asset inflation into the CPI. And set a CPI target. And balance the budget.
I'll say this, though: If I were in Britain or Australia right now, I'd be scared out of my mind. If this is how bad things will get in America, which suffered a much less severe bubble than our fellow Anglos, what's it going to look like when the shit finally hits the fan in those countries? Conservatives want live babies so they can raise them to be dead soldiers. - George Carlin
OTOH, it might be the first to suffer from the consequences of global climate change, wirh a continent that was never very hospitable to start with suddenly becoming even more hostile. In the long run, we're all dead. John Maynard Keynes
The immigration and strenght of the economy make any recession quite unlikely, especially if we talk about house prices, there is a affordability crisis and lack a supply.
my state, Queensland, runs at 5% of growth and 3% unemployment (and still dropping).
I think that the UK property market is protected by demand for rented property, due to the restricted supply of land/property in the UK. The US is totally different in terms of over-supply, I think.
While there is already some pain in the massively growing "buy to let" sector here, a distressed over-geared investor does not have to drop prices too far before another investor steps in who is happy with the rental yield achievable.
The problem we had in the 1990's bust was caused by a recession and the fact that people who had lost jobs could not afford more than a "social" rental, never mind a mortgage. So rental values were dropping alongside property prices and could not support them through invetsment by would be landlords..
That is not the problem now, so UK prices are not, IMHO, going to crash the way they are in the US.
Nor did we reach quite the same levels of craziness in the UK in terms of credit excesses, and risk aversion / prudence has now set in big time.. "Any economic unit can emit money. The serious problem is to get it accepted" Hyman Minsky
May I have a BLT instead, please? -----sapere aude
Take away the Baby-Boomers' credit cards, Social Security and Medicare now before they sink the whole damned ship with their psychotic spending habits.
Or take away the endless and frankly criminal financial farming schemes that leech wealth out of the pockets of people who work for a living into the overseas tax-free accounts of the hyper-rich.
There is more than enough wealth in the planetary economy to provide food, shelter, education and health care for every inhabitant.
If a tiny minority has to be deprived of pointless and excessive luxury to make that possible, that's not necessarily a bad thing.
As for the UK - unfortunately we simply don't have the housing stock in the UK to make a crash likely. Unless the economy tanks spectacularly - which is possible, but not likely given how closely we're tied to Europe - house prices will start to settle, but a headlong 50%+ nose-dive seems unlikely.
