A brief excerpt:
Two years ago, I wrote The Housing Bubble and Mortgage Debt as a Percent of GDP. Here is an update to a couple of graphs. The bottom line remains the same: There will not be cascading price declines in this cycle due to distressed sales.
In a 2005 post, I included a graph of household mortgage debt as a percent of GDP. Several readers asked if I could update the graph.
First, from February 2005 (20 years ago!):
The following chart shows household mortgage debt as a % of GDP. Although mortgage debt has been increasing for years, the last four years have seen a tremendous increase in debt. Last year alone mortgage debt increased close to $800 Billion – almost 7% of GDP. …
Many homeowners have refinanced their homes, in essence using their homes as an ATM.
It wouldn’t take a RE bust to impact the general economy. Just a slowdown in both volume (to impact employment) and in prices (to slow down borrowing) might push the general economy into recession. An actual bust, especially with all of the extensive sub-prime lending, might cause a serious problem.
And a serious problem is what happened!
There is much more in the article.