What if Housing Prices Drop?

The L.A. Times reports:

If values should fall by 10%, one in three would have to tighten his or her belt. And if values should drop by 25% — an amount that is not unprecedented — one out of every two homeowners would be financially challenged.

"Homeowners in markets where prices drop are in for a hairy ride," says James Chung, president of Reach Advisors, the Belmont, Mass., market strategy and research firm that conducted the survey in September.

"Even if prices simply flatten, it is going to cause significant pain and have a large impact on the economy. Appreciation isn't bonus money for a lot of families; it's money that's already been spent." The long run of good fortune is all some people talk about, whether the venue is a formal cocktail party or a neighborhood block party.

Something to think about.