The housing crisis that started it all is far from over. More foreclosures are waiting in the wings. A large number of these are part of the original problem, i.e. homeowners borrowing more than they could afford to pay for houses that sold for more than they were worth. Has anyone forgotten the 5 year rule? The 2004, 2005, and 2006 mortgages are just now starting to reach the end of their 5 year grace period. Then they will reset by 10X or more! How's that for a nasty surprise?
These mortgages were written near the top of the bubble, when home prices were highest and values most out of whack. Furthermore, they were the most "creative" ideas originating from the enormous pool of "talent" that Wall Street accumulated. That means they are by far the most problematic ones. These are the ones people will walk away from.
In the meantime the high rate of unemployment is adding substantial numbers of additional foreclosures, which will lead to a further crash in home prices.
I predict home values will decline another 25-35% before it is all over. "Fake" unemployment (the number the US government uses that does not include everyone who stopped looking for a job, who is working part time, etc. ) will rise well above 12%, with real unemployment closer to 20%. The dollar will continue to slide and we will start seeing obvious signs of deflation.
Deflation is already happening, and if you are paying full price for anything these days, you are paying too much. But so far deflation has been largely hidden or it was covered up by "sales" and "deals." Pretty soon that will go away too and people will see prices drop everywhere.
I stick to my recommendation, buy gold. Real gold that is. You may need it some day in the not too distant future.
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