The Sound of Popping

Well, the latest piece of evidence in the popping of the real estate bubble is the 10.5% drop in seasonally-adjusted new home sales, and the fourth month of decline in median sale price. All the bullish arguments for why home prices would not fall have been shown to be bullsh*t instead! We should see prices continue to drop in the months to come, especially if the US hits a recession at some point in the near term(you know the GDP can't just keep growing!)

I forecast that even places without local real estate bubbles will see a downturn. Why? Simply because of how prices are set. Price is determined by emotion as much as reality, and if and when stories flood the newspaper of individuals losing their shirts (rather than some abstract economic headline number), sellers will be more pressured to compromise on price, while buyers will be encouraged to bargain harder. That's why a recession or even economic slowdown could be significant - a seller who has either lost his/her job or fears doing so is more likely to try to reduce his/her mortgage liabilities for what he/she can.