As far as housing goes, the bottom will be much lower than
now before the end of this half.
The subprime rot is going to play out with a ton of renters re-entering the market. On the real estate side, savvy investors are going to bottom fish good rentals as rates drop while rents actually increase. What else are they (the people who are foreclosing) gonna do! They are gonna rent something. Never been a better time to get into the slumlording business!
Personally, I am considering looking around in certain areas of where I live (Chicago area) - looking for 4 unit jobs in poorer areas of the burbs and renting them to section 8 people at $1k/month/unit. Ive seen em (4 units) in the area going for as low as 350k - which if you can get at 5.5 on an IO, with taxes, you still net 12k/year, with zero appreciation.
I guess what I am trying to demonstrate is that, at some point, investors support the housing market from the bottom. With 4.5% rates, the cost to carry at A credit a typical 100k 1-2 bdr condo is approx 6000/year after tax. A 3 bdr single family is around 15k/year. With a surge in renters that no longer have access to cheap money to buy these places, investors with access to cheaper funding will fill the gap.
The only difference is that the rich will get richer, and the people with bad credit will no longer enjoy the pleasures of rising home equity. However, with the Democrats coming in, some of those same folks will get their money the way that Democrats prefer to, which is to hand it out themselves in small chunks to everyone regardless of personal discipline, rather than do it through letting them invest and create their own wealth through being a disciplined investor.
I think the middle class will be fine. Despite all the doom and gloomers, most people in the middle class still have reasonable credit scores and access to mortgages. Household net worth is at an all time high right now - they have been buying stocks, homes, and other investments, rather than putting it into their savings account (why the national savings rate is considered important, but does not include 401k or investment accounts, is silly).
It is changing though. The days of the secure job from a company are rapidly disappearing. Most of what I see is that people get their job security from the network of people they work with. People are fast becoming independent contractors and freelancers en masse. While it is more stressful, the upside is greater. Seldom anymore does one person (your boss) control your entire destiny, because your boss will change frequently. Even in big companies, the speed at which M&A happens means that you have to adapt to structural change more quickly even in the corporate sector.
The biggest problem I see is that, for a lot of people in the economy, there is a lack of financial planning. I know guys who make 6 figures who live paycheck-to-paycheck. I've seen single mothers who spend $800 per month on groceries because they never learned how to cook. Stupid **** that people do that keeps em poor and not investing. I would love to see Best Buy lose half it's stock value (from people spending less on big screen TVs) if that money got invested into promising drug companies or tech startups instead. But I don't control the world, I just observe it, and invest accordingly
