[Marxism] Worst is yet to come on mortgage crash

[Lou Paulsen]

Another aspect of this which the article doesn't address is the whole
overproduction aspect.  If you come to Chicago and stand down just southwest
of the Loop, say, and look around you, what do you see?  Big giant cranes in
all directions, maybe 7 or ten of them.  And what are they all building?
High-rise condo projects which got planned back two years ago when it seemed
like building condos and converting condos and flipping condos was the magic
road to wealth.  Now things seem a bit more shaky but all these buildings
are still in the pipeline!  Who's going to buy those things, I'd like to
know.  If they all get dumped on the market at fire-sale prices - but that
deserves another paragraph -

The next aspect is what happens to the people who don't have the ARM problem
but find that the equity in their real estate is suddenly illiquid and in
fact is falling rapidly as the market price of housing slips.  In fact that
is happening now.  The building I live in has 19 condo units, one of which
was bought by us in 2004 on a fixed-rate mortgage, thank God.  Four of the
units have been on the market for months.  Our nearest neighbors have moved
out west and have bought a unit in Utah but haven't been able to sell the
one here and also have another unit in Arizona that they can't sell either.
In addition, an awful lot of people have been using home equity lines to
borrow against the equity in their homes, but that equity may disappear at
any time if the general price of housing actually falls.  All of this cuts
into people's purchasing power even if people don't actually get foreclosed
on, and thus the crisis can easily spread into every other part of the
economy.

Lou Paulsen
Member, WWP, Chicago