Recession will be nasty and deep, economist says

[UpInArms]

http://www.marketwatch.com/News/Story/Story.aspx?dist=newsfinder&siteid=mktw&guid=%7BE18E95AF%2DDBFF%2D4EE4%2DACF7%2D530A3CD714D3%7D&symbol=

WASHINGTON (MarketWatch) - The United States is headed for a recession that will be "much nastier, deeper and more protracted" than the 2001 recession, says Nouriel Roubini, president of Roubini Global Economics.

Writing on his blog on Wednesday, Roubini repeated his call that the U.S. would be in a recession in 2007, arguing that the collapse of housing will bring down the rest of the economy. Read more.

Roubini wrote after the National Association of Realtors reported Wednesday that sales of existing homes fell 4.1% in July, while inventories soared to a 13-year high and prices flattened out year-over-year. See full story.

"This is the biggest housing slump in the last four or five decades: every housing indictor is in free fall, including now housing prices," Roubini said. The decline in investment in the housing sector will exceed the drop in investment when the Nasdaq collapsed in 2000 and 2001, he said.

And the impact of the bursting of the bubble will affect every household in America, not just the few people who owned significant shares in technology companies during the dot-com boom, he said. Prices are falling even in the Midwest, which never experienced a bubble, "a scary signal" of how much pain the drop in household wealth could cause.

...more...

[BootinUp]

1. just great, thanks for cheering me up

:(

[Demeter]

57. Since Michigan Never Came Out of the 2001 "Recession"

We envy those of you that have had a good 4-5 years lately.

[MichiganVote]

Oh but billionaire DeVos is going to solve all our problems....smirk

[Demeter]

59. Pigs Will Fly First

[ileus]

120. just sold mine, waiting to buy....how long should I wait?

This could be good news when it comes to prices and interest rates for me. we just pulled 50k from our old home and have it squirreled away while we look for homes/ price new homes.

[Wheezy]

125. not more than 24 months

or else I believe you'll have to pay taxes on the gains.

I assume you're wondering about when prices hit bottom...depends where you are.

[gasperc]

131. slump has been on for at least a year here

we sold a house last spring just at the start of the slump, hopefully we are seeing the worst of it here in MI, the car companies are in a big restructure. parts of the country that saw massive housing spikes are the ones that will really get burned

[Joe Bacon]

146. Hey, Pennsylvania never came out of the 1981 Recession

Once the banks of the Mon, and Ohio Rivers were loaded with steel mills. THen Reagan and his pal Millken let the steel mills dies and nothing ever came to replace them.

It's NEVER recovered!

[shanti]

69. unfortunately

what's bad for you, is good for other people. as housing prices take a nosedive, people that weren't able to buy a house before, will.

[Skittles]

94. the sheer greediness in the housing market has been sickening

absolutely

[Straight Shooter]

141. That just about sums it up for everything that's wrong in America.

Greed of money, greed of position, greed of power, et cetera, et cetera, ad nauseam.

[Skittles]

145. I agree absolutely

I am sick of the crass materialism I see on a daily basis, the ME ME ME mentality :puke:

[n2doc]

104. if they still have jobs... n/t

[shanti]

121. true, true...

love the neil avatar! :thumbsup:

[BeHereNow]

2. Recommended!

Shit is about to hit fan folks.
Hang on as the burning wagon wheels
fall off and we are hurled into the abyss
that the neocon corporatists have prepared
for the serf class.
The only good news is this:
The cretin bushbots are going down
with the rest of us and we can tell them,
"We tried to warn you..."
BHN

[Deja Q]

3. Okay, so what can we do to prepare and survive it?

People pissed on me for posting gloom and doom threads.

Is it wrong for anybody to ask for solutions or means to prepare?

[UpInArms]

6. be as out-of-debt as possible

and live within one's means.

Hope for the best and plan for the worst?

Sorry for the doom and gloom post.

[Deja Q]

10. Right. I'm definietly pulling more out of my retirement account.

It's gotta be paid off then...

[Tempest]

19. Save, save, save

Cut back on spending now, pay off debt and save, save, save.

And get the hell out of the stock market and into medium term CDs or gold.

[mistertrickster]

144. You know, I've been hearing "get out of stocks" since about 1982.

Bank CD's barely cover inflation.

I've been buying a small amounts of mutual funds every month for about 15 years. The total value goes up and down, but lately it's returning about three times the amount I've invested.

That's pretty good considering that only part of the investment has had much time to really grow. A third of the money invested has been in the last five years.

Since the Depression, the Dow has always finished up over any ten year period you can find and has almost always out-performed bonds during that time.

I see the question as--do I want to invest in stocks and take the risk of earning very little return, or do I want to invest in CD's and insure that I earn very little return . . .

[tsuki]

8. No credit cards, own your home, victory garden, owe nothing. nt

[donsu]

116. very good ideas if you own a home and have land - but what are

good ideas for city dwellers who rent and have no land?

(no credit cards, except for real emergencies, is a good idea for everyone)

[Barrett808]

9. I'm consistently gloom-and-doom, and people just ignore me

I wish I'd get pissed on occasionally. ;)

[BeHereNow]

26. Here ya go...

Piss on you Barrett808!
How come you post such doom and gloom
threads on DU???
How DARE you be realistic!
You sound just like that poster, BeHereNow!

Feel bettah?

:hi:
BHN

[Barrett808]

32. Ahhhh, so much better.

Thanks for the pick-me-up, BHN!

:toast:

[BeHereNow]

35. No problem!

I should be preparing for the little
job I PM'd you about, but I would rather be
DUing than working...especially if a fellow DUer
needs pissing on!
"BAD BeHereNow...!!!"

I know you'd do the same for me!

BHN

[Barrett808]

128. Word. n/t

[anitar1]

96. I'm already starting edible landscape

and have cut down in so many ways this last year. It is gratifying to see what I can live without and saving money while doing it.

[coalition_unwilling]

134. Read (or re-read) Thoreau's "Walden" It's a primer on how to

live a quasi-Spartan lifestyle, with a peculiarly American cast.

[Blue_In_AK]

4. I am so glad I bought my duplex in 1990

at the height of Alaska's last crash. I'd be really pissed if I was locked into a huge monthly mortgage payment. Right now my tenants pay 3/4 of it.

[Tempest]

21. Today I'm happy with Alaska's Repugs

They got rid of that POS Murkowski.

WooHoo!

[lyonn]

50. Is that a sign from the gods?

WoooHoooo!

[Blue_In_AK]

84. Yes, they did good.

Of course, I'm supporting Tony, but if Sarah pulls it off in November, at least I won't be reduced to sobs like I was when Frank won. She's a very likable candidate and has run an extremely clean campaign despite some really negative campaigning by her opponents in the last couple of weeks. I like her style, even though I disagree with some of her positions.

I'm very proud of Alaskans this time around. Some old-time Republican incumbents were defeated, we have a good candidate to run against that sleazeball Don Young, and we voted to reinstate our very tough campaign finance law which Frank had gutted. I really feel the tide turning here.

[Tempest]

112. My sister says the same thing

She lives in east Anchorage and she says her rightwing neighbor's attitudes have been moving to the center over the last few years.

[Double T]

5. The housing 'bubble prices' were NEVER REAL.....

this is a replay of the dot com scams on an even larger scale. The realtors, brokers, appraisers, real estate investment companies, developers and mortgage lending institutions ought to be hung by their collective balls.

[endarkenment]

11. Uh - bubble prices are never real.

That is part of the definition of a bubble.

[Singular73]

14. ROFL

[Missy M]

39. Oh come on now,....

he/she was just making a point and a very good one at that.

[Double T]

103. More to the point, 'values' are NOT REAL, PRICES......

certainly ARE (WERE) REAL which is why so many people will be screwed going forward.

[acmejack]

47. I lost my ass in the dotcom thing.

I had lots of Dell stock, lots. I worked there then. Oh well. I was destined to be poor, as the man said, God must have loved poor people.

[Double T]

102. ....somebody said the meek (humble) shall inherit the earth.......

.....still waiting

[Virginian]

124. Diversify Diversify Diversify

It is not a good idea to put all of your eggs in one basket.

When you only own stock in the company where you work, if the company takes a downturn, you may lose your job and all your investments.

Invest in where you work, but put your investments in other things, too.

[qanda]

7. I know so many people who are struggling to keep their homes

It's not even funny. I hope this doesn't come to pass, but I think it just may.

[Barrett808]

12. In 2008, who will inherit (and be blamed for) these neo-con disasters?

Who would want to inherit this mess?

[maseman]

23. Preparing for the worst

How do you prepare for a recession? To some degree it is just common sense things. Sell or trade in that SUV for 4 banger car. It may be small, uncomfortable, etc. but in the long run it will be cheaper. It may even cost money for you to pay off your loan, etc. But a small car uses less gas, usually costs significantly less to insure, tires are cheaper, brakes are cheaper, cheaper to tune up 4 cylinders then 8, etc.

Unless you can't avoid a move, try to stay in your house if you have a locked in mortgage rate. I am locked in at 5.85%. A mortgage isn't a bad thing when you have a low rate, modest payment within your means and a decent interest tax write-off.

I quit smoking and drinking Starbucks. That alone saved me about $50 per week. I still drink coffee...out of my 2 cup Mr. Coffee machine.

I put in a wood stove two years ago. It doesn't completely heat the house (ranch style) but it cuts my gas bill in half.

Pay off credit cards now. Interest rates will go up more. Pay off student loans or home equity loans.

Someone said above "Live within your means." You know what, it might not be glamorous lifestyle, but we can still live comfortably even in a downturn. The hardest hit will be the middle class and upper middle-class who want to live like rich folks. Tons of debt, etc.

[Barrett808]

33. Good tips, thanks. n/t

[NMDemDist2]

58. i sold my home and bought another cash out of my captiol gains

and my car is a good one with decent milage

i got eheaters so I doubt i'll even light the furnance's pilot unless we get a BIG snow storm

i wish i would have had time to get a garden in this year so I could have put up some veggies, but next year I will

i'm buying only local meats and getting as much produce as I can from the truck farms locally

since my overhead now is 1/3 what it was in PHX it won't take much to get by

[spooky3]

117. Here's a tip I almost never see mentioned

For those for whom the Manolo Blahnik fits:

Stop falling for the fashion marketers' hype. Stop buying clothes that go out of style in a year. Don't make fun of people who buy high quality, inexpensive clothes that last a long time.

I am always amazed when I see people who are struggling to buy a house, pay for a car, etc., spending $$$ on poorly made clothes with this season's color, only to throw them away and spend more a few months later.

[JAYJDF]

13. I think the opposite might not be all that bad. Why pay off the house

and debt? Face it, if the "bubble" does burst, it's taking down everything. There are a lot of things on the edge, starting with the value of the US dollar. Face it, what are they going to do, take everyone's home away? Why would they do that, there won't be anyone left to buy them. This is like a get out of debt free card. Can't jail everyone. Can't put everyone on the street. It could be like one big restart for everything.

[Singular73]

15. Yeah, thats just what happened during the Great Depression

Oh, nevermind, actually they did foreclose everyone's homes, and the super-wealthy scooped them up at rock bottom prices.

[cassiepriam]

99. That was uncanny. We made the same post at the same time. NT

[cassiepriam]

17. Remember the Great Depression?

Everyone did get thrown into the street. Some smart people
with capital bought up all the foreclosures.

[nashville_brook]

65. new bankruptcy laws... nt

[Delphinus]

138. Will that be enough

to start the revolution? Will it be Civil War - rich against poor?

[eallen]

25. There is no "they." Yes, the mortgage holder will foreclose. And more....

The home owner will owe any excess on the mortgage, beyond what was satisfied after foreclosure by the sale of the home. That will include all interest accumulated between your last mortgage payment and the house sale, and any cost of sale.

Whoever holds the mortgage is just a company or financial institution that will act to maximize their own situation. They are no more concerned about the effects of their actions on the value of the dollar or employment rates or public expenses, than anyone else is in their individual financial dealings. The homeowner might be able to negotiate some relief, by signing over the home in leiu of foreclosure. Especially if the homeowner can bring some money to the table up front.

[BeHereNow]

29. And the really nasty part of what you said is...

A house that was valued at the time of the mortgage
at say...250,000, may only be valued at 80,000 when
all is said and done- that fact will not change what the
home owner owes the lender.
And how about those new bankruptcy laws...
Eh?
BHN

[nashville_brook]

66. so like, there should be a law or something...

wouldn't it be great if congress ever passed a law that protected us from the fatcats?

wouldn't it be nice if there were ONE station in life that wasn't vulnerable? healthcare, housing, employment... all fragile.

[Delphinus]

139. The ONLY law

congress will ever pass is those that PROTECT the fat cats! We don't exist in their eyes.

I heard something last night - wish I could remember what it was because I was appalled! Something like the businesses are wanting Congress to write a law that will exempt them from all prosecution for hiring illegal aliens.

[rman]

101. I think they'll make people work to pay off debt,

and they'll provide shelter and food for these people.
As in labor camps.
Not for "everyone" of course; not everyone has debts. But still a couple of million.

[Wednesdays]

115. I agree, except...

they won't be so generous as to provide food and shelter.

[rman]

148. Well, i think labor camps count as shelter

And they know people can't do much work without any food. Even the nazis gave their slaves *some* food.

[wryter2000]

16. I have a FRM

I feel so back for people with ARM's. I could have done that and been paying less every month, but I knew what was coming.

[Monkeyman]

18. People are giving incentives to sell their homes

We had a family here give a weeks vacation to Europe just to sell a 350,000 home

[Dr.Phool]

20. Please don't crash for another week or so.

Next week, I'm supposed to close on a house that I've been trying to give away for 4 years. Nice place. Nice neighborhood.

Just happened to be located in Cleveland. The worst market in the country.

It's been draining me financially for 3 years.

[UpInArms]

24. ...

I hope your Cleveland house closes on time - good luck!

[liberal N proud]

22. I didn't know we were ever out of Recession

The economy has been in the toilet since the republicans have been in power.
As history shows, Republicans in power = Recession.

[Sherman A1]

67. Well Said

That is what my Mom told me years and years ago. When the Democrats are in office my wallet gets fatter, when they are not it gets thinner,

[FILAM23]

153. Works both ways,

my wallet was at its thinnist while Carter was prez,
was fatter under Clinton and is now the fattest it has ever been

[Ian David]

27. It'll be a good time to purchase real estate on high ground...

so your family may survive the Global Warming induced rising sea levels.

Can someone help me find a mountain someplace that will become an island at least 20 miles from the current US Coastline?

I'm hoping that if you buy land that later becomes an island in international waters, you can legally declare yourself a sovereign nation.

[Megahurtz]

132. Excellent Idea!

Or just look for that island as is, now.

That may truely be the only way to be safe in more ways than one!:)

[Delphinus]

140. We all might be praying

that the Global Climate changes hit us NOW, instead of waiting for 2050 (or whatever they say now). This does not sound good ... at all.

Where's Atlantis and when is it going to rise again? That might be the island we're all looking for.

[The Backlash Cometh]

28. Oh, boy. Maybe now isthe time to warn illegal immigrants that

this is the time to stay on their side of the border, 'cuz when the housing industry crashes, I'm not quite sure where they're suppose to go for jobs.

[BeHereNow]

31. No worries! Under the guest worker program...

They will be eligible to serve in the military.
The neocons will be more than happy to
give them jobs in the ME.
Anything to stave off shipping white, pudgy, nike wearing, iPod toting
x-tian American youth.

BHN:puke:

[The Backlash Cometh]

38. Maybe that's what they meant when they said that immigrants take

jobs Americans don't want? I'm just sayin'...

[BeHereNow]

44. That's EXACTLY what they meant...

The Christo-Fascists like to sit around in
their Church basements and worship GW, their
false idol, but they have no intention of actually
participating in the crusade.
They have no problem with sending brown people
to do the work they really don't want to know about.
BHN

[The Backlash Cometh]

45. So they have brown people killing off other brown people.

It's brilliant in its simplicity. You could have a wacko white General flanking them to their deaths and no one will even know that it's part of the grand plan.

Except, of course, that the statistics would eventually catch up with them. And I'm sure someone is keeping a good count of casualties according to cultural breakdown.

[BeHereNow]

48. Don't ya know? JEEBUS only likes WHITE American x-tians

The fucking hypocrites in this country do not
care one bit about their fellow BROWN Christians
in the ME.
Not do they care about CATHOLIC Mexican
guest workers dying for the empire.
You see, under Evangelical ideology,
Catholics are not really Christians.
But, Messianic Jews are...
Israel defending herself against
BROWN Lebanese CHRISTIAN civilians is
perfectly acceptable to the evangelical cultists.
Makes your brain rivet and spin, the hypocrisy that is,
does it not?

BHN

[The Backlash Cometh]

60. The only thing dark about them, is their hearts.

Where will Christianity go to regain its good name after all this is over?

[KaptBunnyPants]

43. Gonna need repo thugs...

Business will be booming.

[warrens]

30. Big difference

Most people OWN their houses. It doesn't matter what the paper value is, as long as they live there and can afford the mortgage. Their liquidity will not change. Their ability to borrow against their house will evaporate, but that's not entirely a bad thing.

It might even lead to a home improvement boom.

I doubt that housing will create a worse effect than the tech explosion. That killed billions and billions in actual money.

Of course, if you bought houses on spec, figuring to flip them and keep the difference, you're fucked. But this might return the price of housing to earth and keep it there for a couple of years. Or hopefully, decades.

[depakid]

75. There's a difference- and maybe a scarier one

All these wierd new mortgage security "products" that are based in turn on wierd new mortgages given out to people with poor credit- and which contain all sorts of variable interest rates- interest only provisions and balloons- when they fail, they're liable to create quite a shock that's reverberate throughout the financial industry.

[RangerSmith]

154. I agree

Even if home sales and prices cool, it won't be the cause of a recession. 6 million houses a month... which would be another 5% drop is still a lot of houses.

[Bretttido]

34. I find Nouriel Roubini's causation flawed.

There will be no "collapse" in housing; the prices of housing may indeed decrease; but the US if filled with people looking to make long-term investments. Low-priced housing will look like a field-day to these people, because they KNOW it will eventually soar. Also, a lack of investment in housing will not have anywhere near the same impact as a lack of investment in the general private sector.

[w4rma]

63. And why will housing prices drop? Because housing collapsed. (nt)

[Bretttido]

70. A Housing Collapse indicates a HUGE drop in housing prices.

I'm saying, there will be no HUGE drop.

[w4rma]

93. Why wouldn't there be a huge drop? Salaries for the median American

are the lowest in a very very long time. There aren't enough people with high enough salaries anymore to be able to afford all of these houses on the market at these prices. And the people with the money are begininning to realize this so they aren't wasting their money buying up houses to let them sit and have to pay propery taxes on them each year because they can't sell them at any profit. The speculators have lost this industry of speculation now. They can't speculate anymore when prices are dropping. And it's the speculators and the low interest rates that are behind the recent price bubble.

[BlueStateBlue]

122. The marginal buyers who bought properties they wouldn't have been able

to afford via conventional means drove the bubble prices up by using easy exotic mortgage money. These people will have to sell when they realize they cannot pay the bills. These people who MUST sell will drive the prices down now. As they sell, the lower prices will affect the "comps" for all subsequent sellers. It's a steep downhill slope from here.

Just my two cents.

[chelsea0011]

36. Whawhawhaaaaaaat? The Pres. just said things are going swimmingly.

He lied?

[indepat]

37. What do you get when you fall in love with neoconitis: bursting bubbles

[54anickel]

40. It's not just the risk of rising foreclosures. 2/3 of the US economy is

based on "consumerism" and that consumption has been financed by credit cards and home equity loans rather than wages (remember we're at a negative savings rate). There is no discretionary income to spend - it's all been debt. When mortgages start to go upside down, consumers loose the "liquidity" that has been turning the wheels of our economy. Those with ARMs will cut back on spending as their monthly payments begin to reflect rising interest rates.

Don't look to business to step up for the baton pass, they've been saying that for years and it hasn't happened - they've been socking away record profits instead. They aren't about to take on a lot of capital expenditures during an economic slow down.

[UpInArms]

42. corporations would rather the entire machine seize up and stop

instead of oiling the wheels.

:eyes:

[54anickel]

49. Short-sighted greed, as usual. Can't really blame them, things have

been going swimmingly for them for so long now. They've raped labor, destroyed unions, butt-f'd the shareholders and created a climate where having overpaid upper management is chic and for some damed reason considered a sign of a successful corporation. :eyes: They've been able to pull it off for so long now, they figure the gubbermint will create greener pastures (bubbles) somewhere else to feed this financialized economy of ours. The world is their oyster.

[54anickel]

85. Oh lookie here - I must be a liar, this says capex is up (again)

:eyes: This almost reads like a reprint of an article from 2 years ago.

U.S. study sees 'small' prospect of recession
Capital spending offsets housing collapse

http://www.theglobeandmail.com/servlet/story/LAC.20060823.ROUTLOOK23/TPStory/Business

snip>

But they also point out that capital spending on equipment and software is "historically a larger gross-dollar contributor to U.S. than residential investment." By their calculations, it has outpaced residential investment by a ratio of between 1-to-1 and 2.4-to-1 dating back to 1959, and is currently at 1.2-to-1.

"It's early, but it appears the capital spending ratio is once again rising after steadily declining since 2000."

Capital spending on equipment and software contributed 0.5 per cent to U.S. GDP in the second quarter, while falling residential investment cut growth by 0.2 per cent, their figures show.

History also suggests, however, that if and when the housing sector cools to the point that it carves 0.5 per cent or more from U.S. GDP, "we should be on heightened alert for economic recession," Mr. Thompson and Mr. Keiser said.

As a result, it is important to be alert not just for signs capital spending is not offsetting residential spending any more, but also that "the hard landing scenario for housing is actually dragging capital spending lower as corporations turn cautious about the future."

more...

[AlamoDemoc]

41. add that to the $100/barrel oil expected when we attack Iran

[AX10]

46. Seeing that there is no inovation pushing this economy along....

coupled with the crippling national and personal debts, a deep recession is in store. Add on oil prices, that will only make things worse.

I do not agree that housing prices will "collapse". More likely, they will slowly fall down a shallow slope.

[TheFarseer]

100. that's such an important point

all we can innovate these days is a smaller and smaller thing to get the internet on and play music. I think it would be such a boom for this country if we were producing renewable energy, especially if we were an exporter of it. That's the way to invent our way out of a stagnant economy.

[coalition_unwilling]

137. There is some innovation happening. I'm now working for a small

telecom startup (at a 35% pay cut) that's doing some exciting things (at least from my perspective). But the innovation is like weeds pushing up through cement blocks. Not sure it is enough to save us from the coming catastrophe. The Keynsian supports for the macro economy have gradually been corroded by 20+ years of Milton Friedman-esque supply side bullshit.

[Joanne98]

143. Milton Friedman should be charged with treason.,

25 years of Voo Doo and everything is in ruins.

[AX10]

152. In his own way, Milton Friedman is a terrorist.

[Gregorian]

51. 100,000 houses on the market in Atlanta.

That's what I heard from someone last night. And the sharks are already descending upon the prey.

[Yavin4]

52. Greenspan Artificially Lowered Interest Rates To Help Bush

He put them at their lowest levels in 40 years, and he kept them low to get Bush re-elected in 2004. These low interest rates set off the biggest housing bubble in U.S. history.

Also, these rates over-shadowed a sluggish economy. Those that depended on wages for their livelihood struggled with job losses due to outsourcing and low job creation were shouted down by those that lived off of the housing bubble.

Now, as interest rates have risen, we still have a sluggishly growing economy but this time there's no housing bubble to make up for it.

In 2000, major institutions in America, the Federal Reserve, the media, and the Supreme court, cheated to get this idiot into power, and everything that he has touched has gone to shit.

[lyonn]

53. Exactly, America has been living on borrowed money

[ozone_man]

55. No place to hide this time.

The housing bubble is popping, and the reinflated stock market bubble will pop in synchrony. Double barrel this time. The debt bubble is the larger of the two now. With home equity tapped, housing prices falling, and interest rates rising, there is no escape.

[Phoebe Loosinhouse]

98. Greenspan is the major culprit. Investors beware.

He kept rates artificially low for years. The mortgage industry exacerbated the problem by creating a whole lot of "innovative" mortgage products that put many people in housing that they really could not afford, particularly after the "teaser" initial part of the ARM wears off. Most of these people were/are counting on price appreciation to bail them out if they need to sell. The game of musical chairs is over when the appreciation stops.

Second problem in the housing industry was the huge influx of investors - there have been some estimates that as much as 25% of the transactions in the past few years have had investor involvement. Again, some of this was enhanced by new loan products. At one time, pretty much all investment property required approx 20% down. This kept this sector smaller, involving people who could afford to pay to play. New investors watched all those "flip" shows on TV or the infomercials about creating wealth through real estate. A lot of them are finding out it's not as easy as it appears. The major issue with real estate is that it is an illiquid investment. If you want to cash in a CD or sell a stock - no problem, you can sell it the same day. Not so with real estate. You need to be able to afford the carrying costs indefinitely or at the very least have properties with no negative cash flow. Highly leveraged small investors in real estate will probably get nailed. That causes more inventory to flood the market, causing lower prices, causing more inventory to flood the market, . . . etc. This was all highly predictable to anyone with half a brain.

Real estate has ALWAYS been cyclic and is highly dependent on interest rates and mortgage products. Anyone who can afford their payments can just sit tight and wait for this cycle to pass as well. The last large housing recession in the Northeast in the ninties took about 10 years to correct before the next boom took off.

One upside that I can see is that I predict that rental rates should also drop as prices depreciate (this is an upside for renters, not investors, naturally.) Also, look for many many more "rent to own" opportunities as investors try to pare down their holdings.

[Yavin4]

114. Amen.

I've been saying exactly what you've posted since 2002 when I saw first hand what Greenspan was doing.

[Anakin Skywalker]

54. But Our Glorious Supreme Highness

duh Prezdent himself said "The economy is strooooooooooong!". You tellin' me His Supreme Holiness is a lier? You best take that back, boy!

:)

[MikeyJones]

56. One of the head analysts from Charles Schwab yesterday said the same thing

I was watching CNBC and this guy said expect growth to rapidly slow.

Even about a month ago on Faux News Dagen McDowell and Cavuto were discussing how economic growth is going to slow to about 2% and how we are headed into a nasty recession soon. I find it strange since I never really considered the recent "boom" a boom at all since it lacked the strength and massive investment of the late 90s and the internet tech "bubble." Never mind the fact they took food and energy prices out of the inflation equation to make a double-digit inflating economy look better than it really is under our current regime.....

[European Socialist]

61. Housing bubble collapse worse than advertised. Owners using ...

incentives to sell homes that don't show up in stats.

[shanti]

74. there's a house down the street

for sale. they are offering $22,000 cash to the buyer.

[hedgehog]

62. This was the lead story on NBC Nightly News Wednesday.

I couldn't figure out if it was a really slow news day so they led off with something they had in the can or if this is developing into a major story even if there is no real focal point.

[GETPLANING]

77. It's that bad

No, it really is that bad. The economy is teetering on a brink. On one side is runaway inflation, on the other is another stock market crash. The Fed can't raise rates without crashing the markets, and it can't leave them alone, because inflationary pressures are building. If inflation sets in, your money loses value. If the markets crash, your assets lose value. Take your pick. The wealthy will simply lock themselves inside their gated communities and wait it out, then buy up the spoils when things bottom out.

[hedgehog]

78. I suspect some of the wealthy are about to lose everything if there

is a recession. Investments have to be somewhere. If the markets crash, the money vanishes. A lot of those mini-mansions are heavily mortgaged. If their value drops, people won't even be able to walk away. Thank heavens Bush and the Republicans tightened up the bankruptcy laws last year!

[NVMojo]

64. We all live in a Bush submarine, a Bush submarine, a Bush submarine!

Isn't it all just fucking great and this is why we need more "terra! terra! terra!" so we can create war jobs!!! Fecking repuke neocons!

[CAG]

68. Dang it!!! Clinton causes ANOTHER recession!!! Gosh, why can't

that guy EVER do anything right????
:sarcasm: :sarcasm: ;-)

Hannity and Limbo are going to be in heaven explaining how THIS one is Clinton's fault, too!

[zbdent]

71. Sowing the seeds ... "Dems caused the recession"

of course, the minor bump in the economy from Bush's tax cuts is already fizzling out ... I mean, if you could afford to buy a new car last year at "employee cost" without taking out a loan, why should you spend your gas money on another car?

[BadGimp]

72. The worst part of this comming resession...

is this:

" "By itself this slump is enough to trigger a U.S. recession: its effects on real residential investment, wealth and consumption, and employment will be more severe than the tech bust that triggered the 2001 recession," Roubini said."

Translation: This recession will slam the middle class and the poor. The really aweful part is that the administration and the Rethuglican controlled Congress has done NOTHING will do NOTHING to lessen it's impact. Because this is what they want.

But big business and big money will see little impact.

Welcome to the New America people. Lower quality of living, fewer rights and privileges.

[OhioChick]

73. Wonderful........

OH never recovered from the last recession.

[Blackhatjack]

76. When housing collapses, it will shake every foundation of the economy...

Ballooning housing inventory will push housing prices down, which will affect the value of houses owned by those currently paying their mortgage on time --thus their equity in their home could disappear overnight. No equity to borrow against, and in some cases homes are worth less than the loan amount to be repaid.

That is bad, but it is not the worst.

As housing inventory builds to unheard of levels, the demand for new housing grinds to a halt. No spec houses will be built, and people with the money to buy will have their pick of the existing housing inventory for below rock bottom prices. So builders have no demand and they quit building houses. That means they don't borrow money to build the houses,which means the banks and mortgage lenders become pressed for profits at a time when many of their loans fall into default. As lenders search for cash influx, they will press the individual borrows the hardest since they are least likely to hire attorneys to fight back. So you have lots and lots of foreclosures, especially early in the recession cycle where there is still some hope of recovering some portion of the amount loaned.

As housing starts bottom out, everyone working in housing is laid off. All the building supply companies like Lowes, Home Depot, see a massive drop in profit. They lay off people to balance their lost income. All the connected housing supply businesses see downturns, like paints, interior decorators, furniture, appliances, etc. They lay people off.

Then the death knell hits the stock market. Banks and lenders begin to close and go under because of so many loans that go bad. Businesses see their consumers dry up, so they have no need to expand and in many cases contract to adjust to smaller sales. Companies sitting on piles of cash look overseas for better returns on their dollar, and the liquidity goes out of the stock market. Stocks begin to tank, prices fall as desperate people sell for what they can get to cover losses in the real estate market.

Add to this the pulling of foreign investment in this country by China, Japan, etc. Interest rates will go up to try and keep the investment here. Plus Iraq, the continuing black hole we are pouring $7-10 billion a month into, will exact its own price on the economy.

The only way out of this scenario is to get us out of Iraq, and for the government to take a central role in countering the usual market reactions by investing in "New Deal" type programs to keep people employed and help them stay in their homes. We almost have to do the direct opposite of what Republicans have been doing since Reagan and Bush I came on the scene. There is no other way to avoid natural economic reactions which will spiral down the value of every asset, and allow those with cash to pick them up for pennies on the dollar.

In other words, a massive transfer of wealth to the rich like has never been seen before.

That is why it is imperative that a Democrat be elected President in 2008 and Democrats retake the House and Senate in 2006. It is all at risk if we fail.

[filer]

79. I can only see one option left.

I'm going to mend my ways and try to Rapture my way out of this mess.

[hedgehog]

80. This is why we need more illegal immigration

Clearly no one is willing to face up to the fact that we need to allow Mexicans to immigrate legally.(After all, just because we used NAFTA to let Big Agriculture destroy the Mexican economy, why should we take any responsibility?)There fore we need to let up on enforcement of immigration laws so Mexicans can come here illegally and shore up the demand for housing.

[Chomskyite]

81. What's this guy's track record for predictions?

Is this another Ravi Batra type? Or a Gary North or Ed Yardeni type?

There's always at least one economist forecasting the end of times. The bad thing is, one of these days one of them will be right.

[knitter4democracy]

82. That's why I'm filling up the freezer.

Food prices are going up, so I'm doing what I can to stock up the freezer and the pantry, a little more every time there's a sale.

We've got to pay off the cards.

[ckramer]

147. And you also need to pray electricity is available and affortable

otherwise, smoke all your meats.

[knitter4democracy]

149. Dry ice works, too.

We're in a good area for power, though. We've not lost it since we moved in to this house, even though others near us have.

[54anickel]

83. Schwab strategist sees high risk of recession

http://sanfrancisco.bizjournals.com/sanfrancisco/stories/2006/08/21/daily28.html?jst=b_ln_hl

Charles Schwab & Co. Chief Investment Strategist Liz Ann Sonders told investors this month that Wall Street is underestimating the risk of recession.

"Don't be snookered by the consensus," Sonders wrote in her Schwab (NASDAQ: SCHW) report. "We typically don't know we're in a recession until after it's either well under way or even over.

"Three of the most common traits leading to recessions historically are all flashing warning signals -- an inverted yield curve (when longer-term rates are lower than shorter-term rates,) an oil price shock and a severe real estate crunch."

Although many on Wall Street don't anticipate a recession, the speed at which the housing market is slowing is alarming.

more...

[RUMMYisFROSTED]

86. My Evictions IPO is going to soar!

[mitchtv]

87. I've been looking for a house in LA

I think I'll wai ta few more months. They are seriously overpriced

[Clarkie1]

88. Great news...maybe I'll be able to afford a house in the S.F. bay area!

Then again...I think this guy is painting a little too rosy a picture, perhaps :-).

[WI_DEM]

89. We will need to nominate a populist in '08 who deliver a strong

economic message. Might be someone like Edwards.

[Just Me]

90. DEPRESSION is now called a mere "recession"

We live in a myth. Reality BITES.

[roguevalley]

91. Lord. More recession because of dumbasses in charge. what will

this mean to those of us on fixed income pensions?

RV, worrying for our countrymen before it even happens. Again.

[Hawkowl]

92. Never During Wartime

There has never been a recession during war time. The economy is just too hot during a protracted war to slip into a recession. Employment is usually full because of the drain on workers by the military. At home, factories are churning out new bombs, guns, vehicles or repairing blown up humvees.

However, if the war comes to a screeching halt, that $300 -400 billion dollar government spending stimulus stops. The national guard and reserves become unemployed and the economy comes to a screeching halt. At least gas prices should fall.

[Nickster]

110. Too hot eh? All we need is the current quarter to have a decline in GDP

and we'll be in recession, even without the war being over. What do you think the odds of this quarter being down are? I'm guessing it's a certainty.

[KoKo]

113. That was when there was a draft and China wasn't making everything

we buy including our uniforms and flags. This is a war fought with few troops and the poorest signing up. This "war in Iraq" isn't like any other war. Vietnam had a draft...we made things here at home...but even then it dragged down our economy so bad that Nixon had to pull out.

Everybody thinks of WWII as booming the economy because we were building Ships and Jeeps and all that went with a massive World War. But WWII helped get us out of the Depression because of the massive spending on all the supplies needed. Still folks did without sugar and butter and basic staples and it was a very bad time for those at home due to rationing of gas, and staples.

Just a quick...answer.

[donsu]

118. actually we are not at war, we are at occupation

nt

[leftofthedial]

95. much, if not most, of America

has been in a nasty, deep recession (or worse) for five years now.

[bd0t]

97. "he stands nearly alone in predicting a recession next year."???

OK, in the article is states:
"While many economists share Roubini's concerns about the imbalances in the global economy and in the U.S. housing sector, he stands nearly alone in predicting a recession next year."

I remember at the beginning of this year that there were a whole bunch of people that were stating that there would be a recession at the end of this year and at the latest next year. So where did all those poeple go or do they not count?

I know in my area people have been out of work for a long time. I've been stuck in a contractor job that is low pay and they refuse to give raises (which I counter by refusing to do work). In my neighborhood they have just increased prices $2000 a year by forcing us to get flood insurance which we can't afford. (Thanks FEMA.) Since I moved into my house in 2000, there has been at least 2 houses for sale at all times. These houses would get bought within 2-4 months of being put up for sale. This entire year there have been no houses sold. The 3 that were for sale ended up giving up cause they could never sale the house. It's pretty bad for this area given that it's the place a lot of rich people move into. It's always being rated in the top 6 safest cities in the country each year and filled with rich people. Yet none can afford houses here anymore.

[DemInDistress]

126. welcome to DU bd0T can I ask you what city your in?

:hi:

I'm in NYC (BX.) where home prices have doubled since 911 and rents are in outer space. What's a poor person to do?

I see a crisis coming to America. Lost jobs, wages stagnant,wars and incompetence from DC. Its coming..

[bd0t]

150. I't's welcome back. and I'm in Cary, NC.

I'm in Cary, NC.
and it's more like welcome back. my previous user ID got messed up somehow and I never could get anyone to fix it so I gave up trying and created a new one.

[elehhhhna]

135. Welcome to DU,bd0t

[Name removed]

105. Deleted message

Message removed by moderator. Click here to review the message board rules.

[DemInDistress]

130. that was quite a history lesson regarding bankers/money changers

I enjoyed it immensely. Here I thought it was greedy oilmen,power hungry politicians and of course the Telephone Companies when all the time the root of all evil on Earth are the "bankers" wow.

Its not hard not to see why Lincoln, Garfield and Kennedy were assassinated they were against the bankers and their deceiving practices.

All in all it was a good read and I thank you..

you should start your own thread with that link.


edit to add a "welcome to DU !":hi:

[PaDem]

106. should I buy a house now or wait?

I'd appreciate sound advice.

[Nickster]

108. Wait. You're at the peak of the pricing, let the prices start falling. n/t

[xchrom]

109. look for interest rates to come down again.

they will -- then look to buy.

[ozone_man]

111. If you can wait

that would be better. Two years from now will make a large difference in price. Also, the economic picture and forecast will be clearer. It depends if you have or are planning a family, etc. If buying a house now, don't buy more home than you can afford worst case, i.e., if the economy goes all to hell. And I think it will.

I tend to joke about selling my house and renting until the storm blows over, but once you have a home, it's not likely that you'd actually do that. Now, if one owned a McMansion and were strapped for payments in the present economy, they might give some serious thought to escaping while there is still time. What was a seller's market is becoming a buyer's market, and eventually will be a foreclosure market.

[BlueStateBlue]

123. WAIT!!!

The carnage is just beginning. You don't want to catch a falling knife. The market's in freefall!!

This site is geared for northern NJ, but is backed up by lots of solid data. Most of the posters are financial guys, very savvy.

www.nnjbubble.blogspot.com

[SoCalDem]

107. I always knew that as we retired (4 yrs off) it would all tank

Just as we entered the job market, a big ole recession walloped us..and then we were "rewarded" with Reagan:puke: who screwed us over big-time..

It's somehow expected that our "golden years"(ha!) would be just as rocky as it's ever been for us ..:cry:

[stepnw1f]

119. Is This Really a Depression? (nt)

[Tellurian]

127. New sound byte....preDEPRESSION is here! n/t

[ozone_man]

151. It may become one.

Too early to guess how deep the recession will be or if it will grow into a depression. But just as people are saying how bad inflation is, they are also noting how consumers have less and less dicretionary income. Salaries have not kept up with the higher fuel costs and debt service costs, particularly as interest rates have risen. When consumer spending finally slows to a trickle, deflation will become prevalent and ultimately depression. That's all imho of course.

[Jemmons]

129. What is this going to do to the dollar? n/t

[mwooldri]

133. And the GOP will spin it in 2010 and 2012 as being the Democrats fault.

They might even "shock horror" blame Bill Clinton.

/Mark.

[slackmaster]

136. Sounds like Mr. Roubini is trying to sell his services

If he gets lucky and there is a deep recession in 2007, he'll be able to hawk himself as the guy who predicted it.

:eyes:

[earth mom]

142. The greed that has run rampant in this country is gonna bite ALL OF US

in the a$$! :mad: