In 2003 I said we had a housing bubble. As usual with bubbles (the same thing happened in the 90's stock market bubble) there was much denial. Now that we're finally past the denial, let's look at what the collapse of the bubble will mean.
Unemployment Over the course of the last recovery real estate related jobs made up the largest proportion of new jobs. Most months, there would have been a net loss of jobs if it were not for the real estate sector (and remember this is larger than just construction, but includes the financial sector, forestry and so on.) When the housing market craters, so will jobs.
Oversupply There will be an oversupply of houses on the market. The crash doesn't end until the oversupply is worked off. The first sign is always (and this has happened) increased time to sale. The second part is when prices start actually dropping. One reasons the naysayers moaned about how housing doesn't burst, it just sort of stagnates, is that traditinally a lot of people live in their houses, and they won't lower prices. But too many people this time either bought houses for spec, or have variable rate mortgages where the cost of the loan will simply become so great they either must sell or hand the key back to the bank. Both options will be taken.
| 