In Greek mythology, Cassandra was a daughter of King Priam and Queen Hecuba of Troy whose beauty caused Apollo to grant her the gift of prophecy. However, when she did not return his love, Apollo placed a curse on her so that no one would ever believe her predictions.
In March 2006, over the course of 3 posts, I announced that I had sold my house, decided not to buy, and politely predicted a major price correction was coming. At that time few people agreed with me. As late as November 2006, 84% of homeowners still believed their house would increase in value or stay the same in 2007. Now it is becoming apparent that the real estate market has begun it’s decline.
This is going to have sad and devastating effects. People will lose their jobs, go bankrupt, marriages will end and many Baby-Boomers counting on home equity for their retirement will be forced to continue working. In South Florida, we already have thieves targeting vacant and foreclosed homes. From Waiting For the Blood to Rise:
The house was wide open, because the lock box was broken and the agent is two hours away. I give it a week or two, and the appliances, ceiling fans, cabinets and anything else that can be stripped, will be stripped. We’re already seeing thieves pull up to empty houses and pull out the easy appliances. They can be in and out in 15 minutes . . . and they can easily spot the vacant houses with for sale signs, no blinds in the windows or the free local papers littering a driveway.
And I believe the decline in real estate will have a spillover into the general economy. The stock market rose when people believed they were rich. The consumer spending party that was fueled by rising home equity, cheap ARM mortgages, and MEW (mortgage equity withdrawals) is coming to an end. The psychological effect of seeing a stranger on the news having their home foreclosed is minimal. When it starts happening to people you know then it becomes real.
Nice work, Chicken Little.
Any other doom and gloom predictions up your sleeve? Between you and Carl, I don’t know who is more pessimistic these days.
Nick’s response is exactly why I used CASSANDRA in the title.