Roubini: 'Housing Prices Can Only Move Down'

Published: Tuesday, 28 Dec 2010 | 12:27 PM ET Text Size
By: Ash Bennington
NetNet Writer, Special to CNBC.com


According to economist Nouriel Roubini, the housing market is in a double dip.
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And, if homeowners begin walking away from their properties en masse, those negative trends might well pick up steam:

"12 million households are already in negative equity and 8 million more have an LTV btw 95 and 100%. Thus even a 5% fall in home price will push an extra 8 million in negative equity with risk of millions walking away from their home—i.e. jingle mail," Roubini wrote me in a text message earlier today.

It's certainly a sobering scenario to contemplate as we head into the New Year.
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http://www.cnbc.com/id/40828545/

Where do they go? They live with family if they can, they rent if they can, and they're homeless if they can't. Right? So, now is the time to own rental properties it would seem. And anyone with some extra cash will start buying up rental properties... stimulating the property markets and raising prices. Basically, the rich and the lucky (or smart) get richer.

Am I missing something?

The housing bubble was two-fold. It was a bankster's bonanza as mortgages became chips in a big gambling casino that went bust in 2008 and has been bailed out to prevent the entire economy from tanking. The other side was the over building that created a lot of jobs and money as you saw new complexes going up all over and McMansions sprouting up all over suburbia. It was all built on easy credit and the push to create housing inventory that could be used as gambling chips. With the casino gone bust, the housing market is over stocked and will remain that way for a long time.

The debt bomb...not just those underwater with mortgages but the millions more strapped with obcene interest rates on cards and in revolving hell are a major weight on the flow of credit and little has been done to really address this issue...just ignore it or kick the can. Meanwhile more people quietly go under each day. This isn't a double-dip, it's an ongoing slide.