\nHere’s a graph of housing prices adjusted for inflation over time.\u00a0 Does it look natural to you?\u00a0 What level would you guess is more natural?\u00a0 Guess what the market will do? (yes, this is simplistic, but it shows the extent we have been stretching and inflating the housing market lately)
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<\/a>\nAs home prices continue their declines, more owners will continue to default since it’s better for the average person to take the default and 8 years of bad credit than pay $150,000 in value you’ll never see again .\u00a0 The BEST we could hope for is that folks stay in ridiculous upside-down loans – which I just find hard to believe.\u00a0 Even if we could do this, folks will be paying for years and years on homes that are not worth what they are paying.\u00a0 Everything will grind to a halt for years while we just pour money down holes and sit saddle with debt.\u00a0 Debt and greed that WE, my fellow Americans, signed with our own hands.<\/strong>\u00a0 This time the corporations just let us be stupid.\u00a0 Yep, they hold 50% of the blame because they were supposed to be doing the right things – but we hold solidly the other 50% for not doing OUR homework.\u00a0 None of this was rocket-science.\u00a0 It’s been in self-help books and homebuying guides for years.<\/p>\n
Prediction: The value of houses in most places will continue to decline by 1-5% every month for the rest of the year and will stay flat for years.\u00a0 Here’s the data for the current situation from S&P<\/a> or already charted for you<\/a>. Obviously some locations will be more than others.\u00a0 But they will all continue to keep declining – which will continue to encourage people to default and walk away from $100,000s worth of bad debt.\u00a0 And there is absolutely no reason for folks to buy a house right now outside of moving.\u00a0 Yes, you can’t guess the bottom – but I can also just wait till it starts going back up and it’ll be safer that trying to catch a falling knife.<\/p>\n 3.\u00a0Job losses will continue.<\/u>\u00a0 Nothing in the bill will address the coming job losses – nothing can.\u00a0 Again, companies are looking at contracting markets – not expanding.\u00a0 They’re not hiring and won’t until a broader turnaround happens.\u00a0 Yes, immediate operating loans will become available again, but that’s just a small comfort.\u00a0 When times get tough – you have to cover your loans much more heavily – tying up cash.\u00a0 This will probably be the case for a year or two in the broad economy, but some sectors will be slower\/faster. Expect job markets to shrink, and lots more layoffs in the immediate future.<\/p>\n 4. Depression is a real word – and we may just get one.<\/u>\u00a0 I for one am still very convinced we’re in a 50\/50 shot for a depression – we’re already clearly recessing.\u00a0 Maybe not quite like the 1920’s, but it will be very bad times.\u00a0 Likely the worst any of us have seen in our lifetimes.\u00a0 Jobs are already starting to declining by 100,000’s per month (159,000 last month alone<\/a>) for the next few months at least.\u00a0 The question is where it stops – and I’m not hopeful at all.\u00a0 There is no immediate positives to turn things around.\u00a0 I predict an unemployment rate of about 9-10% by mid-next year. 5. The days of easy credit and easy ownership are OVER (and SHOULD be)<\/u>\u00a0 Some car dealer was complaining on the radio the other day that folks that could get loans before couldn’t get them now.\u00a0 After giving the sob story, he revealed that folks used to get loans with a score of 625, but now need 640’s or higher.\u00a0 What?!\u00a0 That’s cause of us to run screaming for the doors?\u00a0 Scores below 640 *are* traditionally considered risky bets.<\/a>\u00a0 Lending bars are going to go up.\u00a0 This isn’t harsh – this is the way it always was until the free-wheeling of these last 10 years when we thought we could just throw this stuff out the doors and give loans to anyone.\u00a0 And look where that got us.\u00a0 There are good reasons folks have bad credit scores – and for the most part the law of averages always catches up to you.<\/p>\n So – we just paid 700 billion for something that will help slow the decline, but probably cannot stop any meaningful adjustments that need to happen.\u00a0 Meanwhile folks will keep blaming government and corporate greed when they’re really not understanding the problem.\u00a0 Congress will continue to oblige with things that look like their helping on the surface to appease the masses – when the truth is NEITHER party will be able to stop the coming slides – just mitigate it.<\/p>\n
\nI sure hope you’ve saved up some living cash.\u00a0 I feel exposed with just 9 months of living expenses saved right now.\u00a0 I wish I’d saved up 2 years worth personally.\u00a0 I’m cutting 90% of my discretionary spending and working towards that goal of 12-24 months of living expenses.<\/p>\n