BANKS/LENDERS
Much of the concern about another housing dip centers on the banks. A sharp house-price decline could lead to more foreclosures, hammering profits and reducing lending, such as it is. Here is a look at just a few factors that contribute to housings Adverse Feedback Loop.

Economist Michelle Meyer identifies an “adverse feedback loop” where:

It has been reported that over $1 Trillion in homeowner’s equity has been lost during this past recession, so far. This represents Billions of dollars that are no longer available to small businesses. Whatever the final numbers are this traditional source of financing small businesses has been severely limited creating another adverse feedback loop:

Lower Home Prices => Lower Home Equity => Less Financing Available for Small Business (a key source of financing) => Fewer New Jobs => Prolonged Housing Recession

THE OTHER FACTORS
Truth is that you can create additional adverse feedback loops for Shadow Inventory, Distressed or Foreclosed Housing and you have the same outcome – Prolonged Housing Recession. The feedback loops seem unlimited.

Recently, we hear that an economic recovery will exclude both jobs and housing. While the other economic fundamentals are encouraging it is will be difficult for any sustained economic recovery to exclude the key factor to economic growth over the past 30 years – housing. Housing has and continues to be the primary support to the US economy and very little commerce is not impacted by housing: land, building materials, the trades (jobs), furnishings, appliances and local, state & federal tax revenues, and on and on.

Any genuine economic recovery must include jobs and housing.