Christian

Outlook for The Market, The Fed and Housing

Quote: "It seems unlikely to me that 4% of the US residential home market in trouble is unlikely to cause a significant economic slowdown unless this effect becomes magnified through reports in the media." I disagree - the risk is much more significant that you're writing here. You're right, it's only 4%, but it's MARKET prices for homes that will cause the consumer to slow down spending habits - and there's the risk. If you've got 100 shares of stock that 100 people bought at $100, but 4 of them need to sell. If the last guy sells at $50, that has MARKET repercussions on the value of the holdings that the other 96 people own.

Same thing with the housing market - it's 4%, yes, but the actions of that 4% and of the various speculators in the market will affect the rest of the homeowners across the country.

I'm sure homebuilders will do well long term - it's just a question of how long and how severe the intermediate trough will last while we slog thru this housing mess.