I found this great, long, article Lights Out in Georgia at the Vancouver Housing Market Blog. I skimmed over the Sonnypage posts and got the general feeling of it. It was interesting to see the real estate’s total shift of opinion from the beginning, “There will be no recession in 2006”, to the end “our worst second quarter ever in our twelve years.” I really liked Mish’s analysis at the bottom of the page. Here’s an excerpt:
The “strong economy” was (and still remains) an illusion. What we had was an economy totally propped up by homebuilding and real estate transactions. 40% of all home buying in both 2004 and 2005 was for second homes or for “investments”. In addition people were all too quick to spend that increased “wealth” from home price appreciation (and then some), going deeper and deeper in debt.
The economy has not crashed (yet) because homebuilders are still building. That supports jobs. But when those houses don’t sell (and they won’t – without enormous discounts) all this “paper wealth” of homeowners is going to vanish overnight. As soon as someone drops their price by $100,000 every house in the neighborhood will be repriced. Comps will drop like a rock. Consumers used to seeing nothing but rising prices are in for a rude awakening. Their house will no longer be an ATM. Consumer spending is 75% of the economy and it has only one way to go and that is down. There are going to be a lot of people hurt badly in the recession of 2007.