Housing Crisis, or long-overdue Correction?

[El Pinko]

Do you see it as a "Housing Crisis", or as a long-overdue Correction? (looking at the issue separately from its obvious ripple effects on the economy)

[marmar]

1. Both.....

It's a correction, but because our economy depends completely on easy credit and the availability of home equity $$$ to buy a bunch of merchandise we've been convinced that we need, it's a crisis, because that spigot has been turned off.

[slackmaster]

2. The HELOCs and flipping are symptoms of the underlying problem

Which IMO is people getting caught up in a wave of greed, intent on making a buck fast.

It's like a big Ponzi scheme. The ones who got in late and didn't get out in time lost their shirts, and that group included young people who got desperate, fearing they'd never be able to get in.

Last time around, late '80s to about 1991, the symptoms were a round of ridiculously high mortgage interest rates followed by marketing of variable-rate and balloon-payment instruments.

History repeats itself. Experience can give you the ability to recognize patterns if you focus on the numbers and don't allow yourself to get caught up in conspiracy theories. The market is like a big dumb animal, reacting to what it sees in front of it.

No crisis, just the market repeating an old pattern.

[Tesha]

3. It's a long-overdue correction but it won't be big enough for working people to...

...once again be able to afford to buy houses near
their workplaces.

Tesha

[Warpy]

4. There are aspects of both

Right now, it's mostly a correction as the hyperinflation of the last 6 years starts to deflate. Some areas have seen rapid deflation up to a third of a house's maximum pumped up price. Others have seen only a modest decline. As the supply of unsold housing increases in these markets due to normal forces plus defaults on mortgages, this process will continue, made even worse by the overly tight money policies of banks fighting for their own survival.

It will turn into a housing crisis as the supply of unsold units on the market becomes so great that no one will be able to sell in a realistic period of time. Values are likely to fall below what they'd be indexed to inflation. Many families are going to find themselves in a negative equity situation even though they'd bought wisely outside the bubble and never used the house as an ATM.

The only thing that will turn this around is the only thing that will turn the whole economy around: reverse wealth concentration and put wealth back into the hands of the American people.

Suppressing wages and compensating for it with easy access to massive debt has reached it's endpoint. Only a reversal of course will avert disaster.