"Britain had a residential bubble-bursting in the early 1990s, and it was pretty nasty. (Any Brits want to provide some details?)"
Yep, pretty effing nasty. The thing worth remembering is that modern economic commentators often talk as if the crash of the 1990s was caused by the increase in unemployment and economic slump of the post-1989 Lawson years. But a glance back at the charts shows that the causation ran the other way round; the housing market crash preceded and probably caused the slump.
On the other hand, a US version of same would, IMO, not be quite so bad. Three reasons:
1. While the UK boom was most pronounced in London and Southeast, it was country-wide. The US boom appears to be geographically concentrated, so there is some escaping it.
2. Mortgage payments are lower on average than they were in the UK when we had 15% interest rates. There isn't that crippling burden of the monthly payment, which was just /universal/ among the homeowning classes of the UK at the time.
3. If I understand it correctly, you guys have much more civilised default arrangements for mortgages. If I have it right (I might not), the householder has an effective put option[1] to put their house back to the lender at a strike price equal to the outstanding value of the loan; the option to "hand the keys back". No such option to walk away from the deal exists in the UK system, hence the phrase "negative equity trap", referring to a situation in which you want to move house, perhaps to a cheaper place, but can't because the sale price of your current house won't cover the mortgage. This became a phrase in common usage in the UK in the 90s and can still raise goose-pimples in the electorate.
If I have it wrong about the hand-the-keys-back option, well then, get ready for "negative equity" horror stories.
[1] If you don't know what one of those is, it's in "Wall Street".
"You're not going to see air-pocket declines, like in the stock market; the housing market is too slow for that to happen. But something's gonna happen."
care. there will be air-pocket declines, you just won't see them in the national averages. if you're trying to sell a house and it won't move and you have to cut the asking price by 20%, then you'll see that as an air-pocket decline. The "slowness" of the housing market is *illiquidity*, combined with the averaging effect over transactions. Seeing your stocks fall by 10% in a day is pretty nasty, but not being able to get rid of the things at all, at any price, is much worse.
best of luck and don't try to catch any falling anvils!
dd
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