(Message to our 'youts' - time is on your side - in Kalamazoo or anywhere. - CL)
The winners and losers when the housing bubble pops are clear: the younger generations win, the older generations lose, and those who counted on the phantom wealth of bubbles lasting forever will lose while those who didn't enter the speculative bubble will win.
All bubbles pop, and assets fall to levels that everyone at the top of the bubble agrees are "impossible." The Federal Reserve socialized the housing market starting in 2010 to arrest the deflation of the 2006-07 housing bubble by buying trillions of dollars of mortgage backed securities (MBS). This is visible in the chart of the Case-Shiller National Home Price Index:
This time around, the Fed may not be able to "save" the bubble from a complete round-trip deflation, which history suggests might decline by 50%. Yes, yes, we're millions of housing units short of demand, etc., but speculation has driven hoarding to levels that are not easy to measure. Once the credit bubble pops, all assets driven higher by speculative credit will pop, including housing.
