5 Reasons Why The Housing Market Will Continue to Decline Until 2010

[PSPS]

5 Reasons Why The Housing Market Will Continue to Decline Until 2010: Extrapolating The Free Ride Bird and Dancing with the Housing Pied Piper.

March 1, 2008

Many know the story of the Pied Piper of Hamelin. Legend has it, that in 1284 the town of Hamelin Germany was suffering from rat infestation. The townsmen where worried and desperate for any help. In comes a man in colorful garment promising the town that he would lure the rats away. The townsmen in return promise to pay the man. The man accepts the offer and plays a musical tune on his flute luring the rats away where they are led to water to drown. Even though he succeeded as promised, the people in the town refused to pay. The man left but later returned to the town to seek revenge. After returning, he played his pipe once again but this time lured children of the town away never to be seen again.

Now I’m sure many of you have used the term “pay the piper” but apparently many are now reneging on this promise and simply walking away from their mortgage obligations. What we suffer in this decade is a consumption infestation built on credit and when push came to shove, many people weren’t too attached to their homes. From a business stand point, if you are severely underwater on your mortgage walking away may be the best option. In fact, we are now seeing people employ this technique on auto loans and also credit cards. After all, if you are having a difficult time paying a resetting mortgage you may also opt to let the $80,000 luxury car go with it. In a USA Today piece there is a new trend emerging, some mystics and erudite economist are calling it Spend Less Than You Earn (SLTYE):

(snip)

The free ride was built on easy access to credit fueled by the lax lending standards of the Federal Reserve and the lack of any enforcement of any laws. We had a monumental shift in psychology during this time. Through financial alchemy and risk management, it was no longer necessary for you to save to purchase homes or any other consumption items. Through the art of loans, you were able to have that $70,000 car on a 6 year note or that glorious $600,000 McMansion with a 2/28 Option ARM Mortgage. So what if your income was only $75,000 because you had to keep up with folks making $14,000 passing you up in the fast lane buying homes in the $700,000+ range. But all this spending was nothing more than a pyramid scheme. You had to keep getting new credit via refinancing or credit cards to simply keep the game going. In fact, many homes were the gift that kept on giving. With HELOC, you had a built in ATM machine with your house and many came to rely on their home as another source of credit.

(snip)


Many Americans are now realizing that being tied to material items comes at a heavy costs. If you have beaucoup debt you are unable to do other things. When you ask Americans to imagine a wealthy individual, they will tell you that they drive in a foreign luxury car, wear a $5,000 watch, and live in an uber McMansion. Yet the reality is very different. As highlighted in the Millionaire Next Door, many of the day to day millionaires drive nice but not super expensive cars, live in modest homes, and don’t spend ridiculous amounts on artifacts of wealth. The book was written before the housing bubble but the fact remains, wealth is not possession of expensive items. Wealth is having the freedom to do what you want. Having massive amounts of debt hanging over your head is not wealth, it is a financial albatross that will take your freedom away. Many Americans realizing this new concept, are deciding to walk away. So what if their credit is ruined, they can rent so the logic goes. This is a new sociological trend and is only in its infancy. These are not new however. The idea of being happy on very little was exemplified by families coming out of the Great Depression. When everything is taken away, many will realize a sense of liberty they have not experienced ever in their life.

More at: http://www.doctorhousingbubble.com/5-reasons-why-the-housing-market-will-continue-to-decline-until-2010-extrapolating-the-free-ride-bird-and-dancing-with-the-housing-pied-piper/

[NMDemDist2]

1. we love DrHousingBubble over in Economy, he's (drHB) is even a member here

he's been posting in Economy for a couple months now

if you haven't visited, come check it out

http://www.democraticunderground.com/discuss/duboard.php?az=show_topics&forum=114

[lynnertic]

2. the text you posted doesn't say why it'll last to 2010

is it explained in the article at all?

thx