How much longer can the U. S. economy survive with all the personal debt, overinflated housing, etc?

Does it seem to anyone else like this is very similar to the late 1920's, or even the late 1970's to anyone else? People are building huge houses, but cannot afford to heat them; the housing bubble on paper that people took out 110% mortagages, and now the homes aren't selling for 70% of that? We were just wondering, because we have been saving our money so we can buy when it all collapses!

Answer:
You are one of the few people around that are actually using your brains. The majority of people see nothing wrong.

Now, to answer your question - no one can accurately predict when the U.S. economy will collapse. There is a saying, "Markets can remain irrational longer than you can remain solvent".

But I think the second posters projection is too long. Let me tell you why:

1) The housing market is coming apart (as you've seen), but what you've seen is only the beginning - we've just entered the ARM reset cycle. There are another $2 trillion in ARMs schedule to reset over the next 6 years. With as bad as it is now, imagine how much worse it will be as the bulk of the ARMs reset between now and 2012/13.

2) The US dollar is on the verge of collapse. As of this writing, the US Dollar Index is at 80.39 - critical support is at 80. If the USDX breaks below 80 and can not recover above that level, then we'll probably see a full blown dollar crisis as foreigners dump dollars and dollar denominated assets.

3) The debt of the country is un-repayable. The $9 trillion national debt you hear about is ONLY CURRENT FEDERAL debt. If you take into account ALL federal debt (current, long term, unfunded liabilities, off-budget expenses, etc.) you're up above $60 trillion. If you take into consideration TOTAL US debt (all gov't, ie fed, state & local, all corporate and private debt in the U.S.) you're somewhere north of $100 trillion. We can never pay back that amount.

4) Banks have gotten heavily into the derivatives markets. According to the Office of the Comptroller of the Currency, the top 25 banks in the U.S. have around $7 trillion in assets, but their total derivatives risk exposure is over $135 trillion. Just 1 counter-party default and the entire banking industry will collapse.

These are just some of the problems plaguing the US economy, but I think 20 years to too far out. The collapse of the U.S. economy has already begun and I think the general populace with see the acceleration of the collapse by end of 2007/into 2008.

Also, you are wise. In order for houses to become affordable again, they've had to drop by at least 50% in value. Just hold your money, you'll be able to pick up property for pennies on the dollar.

Also, if you can spend $29.95, I would recommend the book "Timing the Real Estate Market" by Robert Campbell (It's $24.95 + $5 s/h). He has developed a system using available housing data to plot a chart showing when a real estate cycle topped or bottomed out. His system called the top before the current sub-prime meltdown. The book comes with a software on a CD, so you can gather the data (he tells you where) and input it into the software and it will then plot a chart showing you if the market has topped/bottomed yet. It would be good for you to get it's difficult to tell when a market is topping/bottoming. You can jump onto the "buy" side ahead of the crowd.

Hope this helps.

EDIT: You can get the book by Robert Campbell at www.realestatetiming.com

I don't know, I wasn't around in the 1920's. The 1970's I had a small affordable house and there was inflation and unemployment too. Yes people today are building large houses and buying large houses because they are in a "rush" (because of the internet) to own the American Dream but they have no finances and the mortgage companies who supported their dream have caused an 87% higher than last year home repossession rate. So yes the young people who were in a rush and didn't understand financing are facing bankruptcy and their lives ruined.

You didn't say what kind of money you have saved or what size home you are looking for or where so I as a real estate agent am unable to give you any further advice. The repossessed homes are out there right now and are on the auction block (auction means you need to have the money on hand to buy them outright), but even at those lower prices people weren't able to afford them (because of the doubled insurance and higher taxes, no money for fixing anything, etc.) so get with a good finance person and discuss your financial stability (your education and how stable your job is and that there are two of you working, etc. so that you won't go under too). Years ago if you earned $25,000 you bought a $25,000 house. If you plan to buy a house for $250,000 (the average home) then you best be earning $250,000.

You asked a question but then your paragraph went off in a different direction. People don't need all that personal debt, and the bankruptcy laws have changed now, and you'll have to make a payment plan to pay that back. Houses doubled in cost over the past five years, but even five years ago people could not afford them or barely afford them. It seems like a certain age of people are taking a lot of chances.

If nothing else changes, maximum of 20 years

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How much longer can the U. S. economy survive with all the personal debt, overinflated housing, etc?

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