The $9 Trillion Housing Hole
U.S. home values have dropped $9 Trillion since the housing market’s peak in 2006. That’s a pretty big number. That’s a 9 followed by twelve zeros. To put that figure in perspective, here are a few things that add up to less than $9 trillion:
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- The combined Gross Domestic Products (GDP) for China and Germany ($8.3 trillion*)
- The combined GDP for the U.K., Italy, Brazil, Spain and India ($8.5 trillion*)
- Total money market funds ($2.836 trillion)
You get the point. The damage in 2010 was $1.7 trillion, which is a jump of 63% over the $1 trillion loss in value in 2009. Furthermore, it appears that we haven’t hit rock bottom yet. Economist Nouriel Roubini, a.k.a. Dr. Doom, famous for predicting the housing meltdown, sees the banks facing the possibility of an additional $1 trillion in housing losses.
In my mind, I flash back to 2006. Real estate was still booming; everyone was making money, spending frivolously. The theory that real estate values couldn’t go down was still a popular talking point. How naive. $9 trillion later, I think it’s fair to say that the theory has been fully debunked.
$9 trillion is such a cartoonishly large number though, that it almost distracts one from fully comprehending the suffering involved. Perhaps these numbers are a little more palatable. According to RealtyTrac, from December 2007 through June 2010, there have been 2.36 million foreclosures. During the same time, there were also 3.48 million default notices and 3.46 million scheduled foreclosure auctions.
These figures still don’t do justice to the human toll. Here in Phoenix, I vividly recall the suicide of local real estate magnate Scott Coles. I remember reading about Chicago real estate mogul Steven Good’s death. And I’m sure most caught the suicide of Bernie Madoff’s son this past week. These are just the high profile stories. There have been countless other tragedies that didn’t make the front page. Not to mention the families destroyed, jobs lost and depression propagated.
I’m not trying to get too somber, just trying to reflect on the true costs of this $9 trillion mess. But not all was in vain. Lessons were learned, resolves were strengthened and perhaps some superficialities squashed. Collectively, I think we’ve come a long way in fully appreciating the little things in life as well as our relationships with friends and family. Yes, we have a large hole to dig our way out of, but we approach this task with an unprecedented level of sophistication.