When I was marketing committee chairman of the Recreational Vehicle Industry Association (RVIA) during the 1980s, we knew that we could predict the RV industry's sales direction by tracking the combination three things: the rate of change of housing starts, the reciprocal of interest rates and the consumer's expectations for the economy one year from now (a key question on the University of Michigan's consumer sentiment survey). Because RVs and luxury boats are the largest discretionary purchase most consumers make, their sales tend to lead the stock market and most other early indicators of the economy.
The question you may have today is how much damage will the upcoming housing downturn inflict on the economy and the price of your home?
On the East and West coasts, they have seen their home values double, or even triple, over the past five years. There's just one problem: It's all on paper. You can't reap the benefit of all that wild appreciation, or protect it from a blowup in your local housing market, unless you somehow cash out.
For every homeowner who fantasizes about semi-retiring on real estate profits and living the simple life, few are truly willing to leave behind friends, extended families, schools and communities. But there's no denying that many harbor fears and worry over how can they protect the home equity that makes up a large part of their wealth.
A study of regional U.S. housing bubbles by Friedman, Billings, Ramsey & Co., an Arlington, VA brokerage firm, found that in the period from 1987 to 1994, bubbles in 42 metropolitan areas lasted anywhere from one to 31 quarters. Median house prices subsequently fell by as much as 39% but in some areas, like San Diego, Santa Barbara and San Jose, they didn't fall at all.
Edward Leamer, an economics professor at the University of California Los Angeles, thinks a housing downturn could "kick the economy into slow growth and possibly an outright recession." He counts 10 declines in residential investment since World War II. Eight of them, he says, provided the early warnings for recessions.
For more on the bursting of the real estate bubble, go to: http://coachingtip.blogs.com/so_baby_boomer/real_estate/index.html