patrick.net

This year will be interest times for recent homedebtors.

Psychology is changing fast. The exit is tiny.

2006 - Sheeple Stampede.

Paul McCulley from PIMCO:

A key characteristic of the property market is that it’s very momentum-driven. This is sometimes called a "reflexive" market, meaning that people are more excited when prices go up even though there is less value, and less excited when prices go down even though there is more value.

Because of reflexivity, once momentum turns and home price appreciation slows, we should see a rather dramatic slowdown in volumes. Home prices don’t have to actually fall for you to have a sharp slowing in the volume of transactions. That is a key analytical aspect of our forecast that a slowdown in home price appreciation will have a bigger impact on the household’s ability to withdraw equity than the consensus probably thinks.

Reflexivity! I have been talking about this for ages.

that a slowdown in home price appreciation will have a bigger impact on the household’s ability to withdraw equity

Now this is why I love the English language, so what you are saying is that the McDebtor won't be able to extract more money from their $hitbox because there is none? Nice. Is he angling for the Fed job when HeliBen crashes and burns?

It's not that housing is crashing, it's that the market is "moderating". Not crashing but equity building is slowing.

Surfer-X, reflexivity will further infer that a "moderating" market will have impact on liquidity and will then feed back into the market. Soon enough, prices will have to correct. Later, lenders will be unwilling to expose themselves to falling value. As a result, prices collapse. Finally, regulators will be pointing fingers at each other regarding loose credit standards. Rules will be implemented. Prices will not be revived for quite a while.

Only then we have the "landing".

Those who are saying that we have already soft-landed are likely to walk off from a still-flying plane.