House prices | After the fall | Economist.com:
Soaring house prices have given a huge boost to the world economy. What happens when they drop?
PERHAPS the best evidence that America’s house prices have reached dangerous levels is the fact that house-buying mania has been plastered on the front of virtually every American newspaper and magazine over the past month.
And here comes the Doomsday climax:
The whole world economy is at risk. The IMF has warned that, just as the upswing in house prices has been a global phenomenon, so any downturn is likely to be synchronised, and thus the effects of it will be shared widely. The housing boom was fun while it lasted, but the biggest increase in wealth in history was largely an illusion.
Eventually, house prices will most likely level off, even here in the Charlottesville market. A bust? I doubt it. Will there be some, perhaps many, who have already overextended themselves by living month-to-month on short-term interest-only mortgages? Probably. Will there be hardship and possible foreclosures for some? Likely.