Pop Goes the Real Estate Bubble?

The Nation, 10-5-05 Pop Goes the Real Estate Bubble

This article explains why “The Big One”—as in major apocalyptic threat—is not the much-feared earthquake that some say could level much of California, or another hurricane along the lines of Katrina, but rather the pop of the real estate bubble.

Citing the recent news that Manhattan has suffered a whopping 13% drop in just 3 months and San Francisco and Boston are following close behind, this article states that the bursting is inevitable regardless of interest rates because people have extracted massive amounts of equity and spent $600 billion —twice the amount of Bush’s sweeping tax cuts and it accounts for 7% of spendable income—a mighty big chunk of money. Those homeowners have nothing to show for their spendthrift ways but massive debt; debt they are sooner or later going to have to extricate themselves from. Such extrication will involve what the writer refers to as a “landslide brought on by innocents.”