Further traumas on this deleveraging side of the long cycle lie ahead. Another sovereign debt crisis in Europe may be in the cards with Ireland replacing Greece as the focus. A further 20% drop in U.S. house prices due to huge excess inventories of over two million and foreclosure delays may push underwater homeowners from 23% of mortgagors to 40% and precipitate a self-feeding spiral of walkaway homeowners and nosedive in consumer spending. Other roadblocks on the deleveraging highway may include a crisis in U.S. commercial real estate (Chart 5) that could exceed the earlier one in housing. Then there’s a possible hard landing in China that exceeds the 2008 weakness (Chart 6) as the government’s measures to cool the red hot property market and economy in general take hold. A slow-motion train wreck in Japan will probably occur sooner or later as her all-important exports fall along with weakening U.S. consumer willingness to buy them, and as her already subdued domestic sector suffers from her rapidly aging population.
The age of deleveraging
Most Popular Articles
Latest Articles
William Chang steps down as Pennymac’s capital markets leader
Chang, who joined Pennymac in 2012, will “pursue other interests in the mortgage banking industry” after leaving on Oct. 11.
-
MBA’s Broeksmit says ‘harassment, deception and distrust from trigger leads’ must end
-
Decisions by legislators, homebuilders may have worsened North Carolina’s Helene damage
-
Getting ready for what’s next: lower rates, more refis, more tech
-
Reverse mortgage volume, HMBS issuance show little movement in September
-
Why downsizing is not an easy call for seniors and families to make