His point is that it’s silly to talk about the number of states where house prices are flattish. The states which matter — the states accounting for the overwhelming majority of housing wealth in the country — have seen their house prices implode. And as a result homeowners are now poorer to the tune of trillions of dollars — or, as the chart shows, almost 50% of GDP.
It’s easy to see why this recession is so severe, if you think about the unsustainable consumption boom fueled by mortgage equity withdrawals between 1997 and 2006. The loss in wealth during the dot-com bust might have been similar, but the effect on consumption wasn’t nearly as big: people weren’t borrowing against their tech stocks in order to buy new kitchens.
Now, of course, all that home equity has evaporated, leaving behind nothing but a stinking pile of toxic debt. We still have no idea how long it’s going to take to clean up the mess; all we know for sure is that the equity isn’t going to return any time soon.
0 comments:
Post a Comment