I'm trying to figure out the psychology behind the housing market-economy linkage now. Think we have perhaps around 80% of homeowners, who may be largely indifferent to the fact that a part of their big windfall is being given back. As long as it's only 5-10% off the peak, or just back to early 2005 levels, their behavior will be impacted only marginally, especially if they buy into the still are single digit increases nonsense. And if not, their attitude is probably, "oh well, easy come, easy go, not going to harm me, I'm Teflon". This is the audience of the shills and canards that Mish alluded to.
globaleconomicanalysis.blogspot.com
The big wildcard though are the 20% or so dicey buyers who bought late (2004-2005), or have serial refied aggressively almost all their late stage gains, see "gaming out the housing Bubble, 2/15/2006)
xanga.com
But those are the folks that seem to be in biggest denial, so we only see them changing behavior marginally once again?
The key then will be new activity and new marginal buyers, and I really feel that's what's lacking now. So listings will just sit, and prices slip away, the lending standards will gradually get tightened more, layoffs in real estate sectors will pick up leaving big holes in Bubble dependant locales, and the housing market just gets sandpapered. But sandpapering isn't the same as a "soft landing", it just takes longer.
The other prospect is a big credit event, a sudden risk recognition, much like a big ice flow breaking up, which quickly unravels available credit for housing, and especially for marginal buyers and speculators. Then we will see a rapid waterfall regardless of what homeowners think. Personally I lean towards this outcome, feeling it could come at any moment, or may even be underway. |
