Friday, December 14, 2007

Depression: great or not so great?

Interesting article from Paul Krugman here . Good explanation of current mortgage debacle in layman terms. Unfortunately, no quantification. OK, I see that if prices go down 20%, 13.7 million homeowners would have negative equity. How many of those will decide to walk away from mortgages? Mind, walking away might seem like a good financial decision, but you are ruining your credit score at the same time, which is a bad financial effect. And that makes all the difference. If there are 13.7 million foreclosures in couple of years, that's a Great Depression in the making. If there are 3 million, it's bad, but survivable. Current rate is close to 1.2 million for this year, not so awful yet.

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