A year ago, I wrote “Housing Bubble and Mortgage Debt as a Percentage of GDP.” I'll update some graphs here. The conclusion remains the same. In this cycle, there is no gradual price decline due to poor sales.
in 2005 post, I have included a graph showing household mortgage debt as a percentage of GDP. Several readers asked if it was possible to update the graph.
First, from February 2005 (19 years ago!):
The following graph shows household mortgage debt as a percentage of GDP. Mortgage debt has continued to rise in recent years, but debt has increased significantly over the past four years. Last year alone, mortgage debt increased by nearly $800 billion, nearly 7% of GDP. …
Many homeowners refinance their homes, essentially using their homes as ATMs.
An RE bankruptcy is not necessary to affect the general economy. Just a slowdown in both quantity (because it affects employment) and prices (because it slows down borrowing) could send the entire economy into recession. In particular, if large-scale subprime loans actually go bankrupt, serious problems could arise.