"Weak housing slows GDP growth"

The U.S. economy grew at a tepid 2 percent annual rate in the third quarter, slowed by the sharpest slump in housing activity in more than 15 years, the

Commerce Department said on Thursday.

It's always been a matter of When not If the housing slump would flow through to the Real Economy. Anyone who owns a house has almost certainly engaged in the practice of using their Home As ATM, periodically visiting their mortgage broker, getting a home equity line of credit (HELOC), and spending the money like ordinary income. This practice works wonders when housing prices are forever going up. Spending seems to magically increase, and the only hint something is wrong is that we are spending more than we make; negative savings rate.

Well, now that housing isn't forever rising, this ATM has vanished, and with it the engine for US growth for the past 10 years. In Bend the effect is magnified many times. Real estate transactions generate income for a huge contingent of our population, and that income pertebates throughout the Central Oregon economy. This same multiplier effect becomes a divisor on the way down, and economic activity in Bend will most likely fall in dramatic fashion once the RE bust gets rolling.

The party is over, and the hangover is about to begin. Like any good party, this one will have hangers-on who want the party to never end, but have no doubt, it will end. It's ending now. We will have short respites as bargain hunters are pulled in at their various price points. The same happens in all bursting bubbles... the first 5% down draws the eager... the next 5% draws still more... until there comes a realization that Things Are Worse Than We Thought, and everyone bails out. That Is The Time To Buy. Unfortunately, it's a long way from here.