Agoracom Blog

US Housing Crisis Is Now Psychological

Posted by AGORACOM at 7:31 AM on Monday, July 7th, 2008

I’ve been unequivocal in my predictions that US housing is doomed …. and that we still have yet to see its worst days. Until now, the market/pundit/banker/speculator solution has been “drop interest rates”. Again, something I have labeled as an exercise in futility from the outset.

Now that we’ve arrived at 2% interest rates and real estate only continues to decline, the proof is in the pudding.

Moreover, things have gotten worse. Lower rates have:

  • Created a lower US Dollar that is >>>
  • Leading to sky rocketing oil prices that are >>>
  • Eating away at consumer wallets that is >>>
  • Leading to corporate layoffs that is >>>
  • Bringing the economy to a grinding halt that is >>>

Bottom Line: Where once only sub-prime borrowers were terrified of losing their homes, we now have everybody scared of falling home equity, losing their jobs and even losing their homes. “Scared” is the operative word. Scared is the reason why otherwise secure feeling consumers just a year ago will no longer stretch their resources to acquire depressed real estate – no matter how “cheap” interest rates get.

It is psychological now. Look for home inventories to climb and prices to fall quite dramatically over the next 12 months.


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