Bursting housing bubble

The net seems to be bursting with news of the burst in the housing bubble. See here and here, for example. I have to agree with Kevin Drum, since home sales are down over sixteen percent here in New Jersey in the last quarter, compared with the same quarter last year. All you have to do is drive around to see the effects. Within a block of me, six houses are on the market, and most have been on the market for more than a month. Last year, there were bidding wars on houses before they even came on the market officially. You rarely ever saw a "for sale" sign.

I'll also go with Kevin's forecast. Falling prices till 2008, with prices probably off around 20% by then. After that, slow recovery.

The real impact though is likely to be on the economy at large. It's the housing bubble that's kept this economy alive (in so far as it has been alive) for the past five years. Without it, it's hard to see what can prop the economy up now. With a terrible economy coupled with many homeowners turning their homes "back to the banks," things could be a lot worse than Kevin's and my predicitions.