Everyone knows that this mess has stemmed from the current housing market bubble bursting. The data are showing that the housing price data are just starting to show signs of a top. A trend is usually defined as 3 data points. According to the quarterly housing data, we have 2 out of three points. I created a chart showing where the median housing prices are now, and where I think they will be in 2009. The chart forecasts a 16.6% decrease in the median price of a home. In dollar terms, that is a pretty big decline, but in real percentage terms, it is not that much. In parts of the country (California, Florida) where homes have went up 100%-300% in the last few years, a decline of 16.6% wont make much of a dent.
(Click For a Better Image)
My point is that housing prices still need to decline and that the mortgage crisis will only be exacerbated by this. Eventually, this is going to bleed over into consumer spending.
As a German economist once told me: "The rest of the world freaks out when American's stop spending"
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