The real estate market is already in the deepest depression in modern U.S. history. If you think it can't get any worse, think again. In several cities, the real estate market is about to drop even more. Home values in many of those cities, such as Las Vegas, have already collapsed as unemployment has shot higher. And with no hope of quick recovery, housing prices are expected to continue to fall. 24/7 Wall St. identified ten housing markets that are expected to drop by at least another 10% by 2012.
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Home prices fell from all-time highs in 2006. Home equity tapped by second mortgages had been a tremendous source of income then for families who used it for retirement saving, education, and simple consumer purchases. Three years later, many of those homes were worth less than their mortgages. A large population of homeowners still owed a second mortgage. The burden of those two home loans happened to come at a time when national unemployment rose from 4% in the mid-2000s to 10%. The mix of unemployment and high mortgage payments ripped the home market apart.
Note that all of those housing markets with the exception of Detroit are in Privatopia.
The economy is neurotic. Six years ago it was deluded by the irrational exuberance of a housing market that could only go up and anyone who could fog a mirror was considered a good mortgage risk, underwriting be damned. Now we've gone to the other extreme and are hoarding cash in a deflation prone economy paralyzed with fear. Unless we can find a point of moderation, the pain is certain to continue.