And just so there are no mistakes that the Great Depression 2.0 is here, pending homes sales plunged a massive 30% on expectations of -14.2, and a previous read of 6%. This was the biggest MoM drop on record. Deflation is here...
“The discount will probably stay between 25 percent and 30 percent as lenders carefully manage the number of new foreclosure actions in order to avoid flooding the market,” Rick Sharga, RealtyTrac’s senior vice president for marketing...
Normally, after a bubble, prices not only return to the mean but crash right through it, and Ritholtz thinks that that may be possible again this time.
The results of the first survey are out, and not surprisingly, it indicates that first-time “homebuyer traffic dropped sharply in May. This drop implies fewer signed contracts in June and fewer closed transactions in July and August.”
What usually happens when markets get wildly overvalued – and a ~3 standard deviation price move sure qualifies — is they get resolved not by reverting to the mean, but by careening far beyond it.
According to the Congressional Budget Office, the losses could balloon to $400 billion. And if housing prices fall further, the cost to the taxpayer could hit as much as $1 trillion.
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