When Japan faced deflation it had an internet boom and US consumer demand (exports) to cushion the blow. Japan also had savings to fall back on. The US has no such cushion, no savings, no source of jobs, and an extremely high level of consumer debt. I have been saying for years those factors make the deflationary pressures in the US far worse than anything Japan faced.

Pudding is served. That pudding is called deflation. And unlike Japan, the US threatens to take much of the world down in a deflationary spiral right along with it.

Eventually this had to happen given that nearly every country in the world, in some fashion or other, became hugely dependent on the US shopping center economic model that is now history.

Consumer Demand For Nearly Everything Plunges

Show no bottom. No price support. Although I don't know if charting as used in the stock market is valid.

In Santa Ana, prices for homes peaking at $600,000 to $700,000 have now fallen to $230,000 to $330,000. Santa Ana was the virulent epicenter of sub-prime mortgages with people with small or no down payments could buy houses at high prices without any income qualification.

Volume was high, then October happened. Buyers are back now, and we don't get the seasonal effect of winter.

http://agonist.org/synoia/20081020/home_prices_north_orange_county_california

But Bush has left us with the mortgages. These debts are only beginning to be wiped out, and given the fall in home values, we have a long way to go before we can get back to a manageable number of homeowners who are underwater. The debt can only be paid back in two ways: through write-offs by the lenders, or payments over time by the borrower with precious cash, which is the one commodity that is in short supply. Since that is the case, we are going with the write-off approach, and the Fed and Treasury throw trillions at the banks while they take losses on these mortgages.

Questions: can we expect seasonality to break down when the economy transitions from growth to recession? Second, does an altogether new seasonality crop up in a recession, or is it just chaos?

The sales of the new homes can be safely ignored, but the deterioration of the sales figures of the existing homes is more severe.

_{--Storm brings only richness with it}

People were buying these things with the expectation that they'd not only "make money" on them, but be able to sell them quickly if things went bad (job loss or whatever).

It's like people woke up and realized a house is not a greenback worth $300,000.

In one sense, I'm the beneficiary of the boom. I sold a rental property in 2004 and essentially doubled my money in the four years since I bought in 2000. But it cuts the other way in that I sunk the gains into a new house. I pretty sure I couldn't get my downpayment back if I wanted to sell now.

2002-2006 in many "hot" housing areas were nearly 2X-3X over the previous 5-yr rate...so, exactly what is wrong with values falling 40-50%????? This moronic rush to "stabilise" resale home values is absolutely contrary to a return of normalisation of bubble prices, and the fact that "the American Dream" somehow subsumes home ownership at any cost simply is unsustainable at current borrower liabilities. What is so wrong about renting, for god's sake? Why can't prices simply be allowed to fall to a level consonant with "affordability"? Are the classic formulation for taking on a mortgage: i.e., 20-25% down, payments equal or less than 30% of gross income, so iniquitous that they have to be loosened to the point of BAD RISKS? Yet another case of an American myth badly needing grounding in very basic economic parameters. Give it up, people...in this case, it's really the "free market" that will/should determine who owns-who rents.