Dooming of Realty

If you read some of the real estate pessimist sites, you'll get a strong sense of doom and gloom. But I believe a perfect storm is taking place:
  1. housing is bust, equity disappears. With resetting ARM's, people will foreclose or dump their homes.
  2. mortgage related biz are hit already but probably will continue to get hit: banks, S&L, etc. with nonperforming loans. Secondary mortgage market will go bust too (like Fannie Mae and Freddie Mac).
  3. builders will go bust: buyers thin out and those who want to buy will have harder time getting loans.
  4. city, county and state finances will be hit hard: non payment of taxes and then lower valuations. [builders and homeowners alike]
  5. unfunded pension will grow dire, hitting the retires of both private cos and government. [bad mortgage based securities, dead REITs, governments can't pay into their pension funds due to #4] Also new rule GASB Statement 45 will require governments to be more transparent about pension requirements and this may kill a lot of bond ratings starting this year.
  6. foreign investors will call in their loans or dump the dollars and effectively kill most trades.
So the cry will call out: save us, Mr government! Since the 9/11 government handouts and even more widespread handouts with Katrina, it won't be a stretch for people to ask relief from all this mess from the government again. And guess where the money will come from? Us taxpayers. Sigh.

[update 2/7: cities and counties -- like Orange County did in 1994 -- can go bankrupt so that can really crimp the economy.]
[update 2/13: see this article "SD borrows $100 Million to Infuse Underfunded Pension System" for an example]