Grace, I'm sorry, but there are just too many known generalizations and too many matter of fact conclusions.
<<House price appreciation hasn't created income,>>
Yea, it created 1) debt and 2) temporary income for millions directly or indirectly involved. The debt remains, the income does not.
<<If anything that money flow into housing helped pump up the Chinese economy, not the US. Stopping the flow into housing has a lot less consequence for the US economy than most think, at least beyond those in the housing industry itself like the home builders and home improvement industry.>>
I actually agree with this, though I wouldn't say the consequences for the US are nil. Sure if you owe $100 to the bank, you have a problem, if you owe a few trillion, it's the Asians' problem. But the adjustment from debtor to saver, while good is painful.
Also the US financial community will be hurt. I know nobody gives a sh!t about me and my Porsche payments, but no doubt I'm a little worried (though for all you haters, I have plenty of assets that I rolled my bonuses into in flyover country as John Vosilia knows...I ain't dumb).
<<During the last period of flat RE prices the economy boomed and incomes rose.>>
C'mon, this is like no other period. No inflation and interest rates as low as they can go. The worst of all worlds for an asset dependent economy is NOMINAL price depreciation and that's exactly what you're getting. There will be no refinancing cycle this go-around and inflation is minimial if you believe the TIPS - which I do.
<<People who have the cash flow or growing incomes to pay off that mortgage will be fine. >>
Well duh. Let them eat cake!
<<Those without sufficient income to pay their debts will default, companies and individuals who bought that debt will lose. Bad debt gets cleansed in this country.>>
And none of this will be bad while it's occuring? Or is it spilled milk? I'm not following the points here.
<<In the US if people took on more than they can pay, they will default, the debt goes to debt heaven (notice I didn't say money heaven because the money created is still out there).>>
Once again, duh.
Let us not forget the corporate credit froth, commercial real-estate froth, though while not bubbles are certainly stretched and will provide no net positives during the leverage unwind.
Also, for the record, I rent a house. I have the capacity to buy a house - I certainly own stakes in many commercial properties in flyover land - but I was waiting for Wall St. to crack so I can get my house and pied a terre on blue light special. |
