CONSUMER BANKRUPTCY FILINGS hit a new record in 2005--up 32% from 2004--See stats below.
OVER TWO MILLION FOLKS?!?!??!!
Surely, the tougher new bankruptcy law enacted in November of last, helped many to make their decision early, but think of the vast number of people who held out anyway, scraping by to make ends meet every month... What will happen to them? What will happen to all the new home owners who chose Interest only 80/20 loans when their loans need to be reset? What will happen to millions of hard working folks when the housing bubble leaks out 30-40% of its excess?
Today, the American consumer is absolutely strapped (see negative savings rate) and when housing values fall, the housing ATM will be unable to produce any more cash, and bankruptcy will be their only option. When this happens, the numbers shown above will pale in comparison to the new numbers and if graphed, these new numbers will be off the Charts!
This will only be the beginning however, as financial institutions will go under, millions of jobs directly and indirectly related to housing will be lost (realty, home furnishings, construction, finance, remodeling, pool companies, landscaping, etc), the economy will contract, the dollar will fall, Asia and the world will suffer and the downward spiral of the worlds greatest economy will have begun.
Unless of course, the "Helicopter man" upon swift realization of what's happening, decides to intervene and quickly/substantially lower rates--to save the housing bubble and the imbalances for another day...