‘Low Ball Bidders And Cancellations Now The Rule’
MarketWatch has this report. “A growing percentage of U.S. housing markets are “extremely overvalued” and are at risk of falling prices, according to a study based on government data released Monday by Global Insight and National City. In the first quarter, 71 housing markets, representing 39% of all U.S. housing, were deemed to be ‘extremely overvalued’ based on median sales prices, median income, population and historic values.”
“That’s up from 64 markets accounting for 36% of housing in the fourth quarter. In the first quarter of 2004, just 1% of housing was considered overvalued. When prices do fall from overvalued levels, they typically fall by about half the overvaluation, (economist) Richard DeKaser said. The correction usually takes three and a half years.”
“California and Florida accounted for 17 of the top 20 overvalued markets, economists at the two firms said.”
From Inman News. “The number of existing homes listed online for sale in the largest 100 metro areas in the nation grew 60 percent from May 2005 to May 2006, according to an analysis of homes listed online at the Realtor.com property-search site.”
“The survey, conducted by Corzen, a real estate research firm based in New York City, found that the inventory of homes listed in these metro areas grew from 1.3 million in May 2005 to 2.3 million in May 2006.”
“Median list prices were up 8.4 percent from May 2005 to May 2006, while ‘in some parts of the country … median asking prices showed steep declines, a clear sign of softening with the real estate market,’ Corzen announced today. List prices for existing homes dropped most in Florida, California, Massachusetts and Washington, D.C.-area suburbs in Virginia, Corzen also reported.”
“Charles Thibault, who conducted the county-by-county analysis, said, We do see significant decline in asking prices in certain counties, where the volume of available properties online has increased as much 400 percent. Thibault also reported that 75 percent of the counties in the company’s sample showed no change or increases in prices, suggesting that asking prices in overall market are not in a downward cycle … yet, he stated.”
From the Associated Press. “Low-ball bidders, persnickety buyers and cancellations are now the rule in once-hot housing markets.”
“Rising interest rates and sky-high home prices have cooled real-estate investment, ‘particularly in high-end markets in some juiced-up parts of the country where speculation was most rampant,’ said (economist) Mark Zandi.”
“Ara K. Hovnanian, CEO of homebuilder Hovnanian Enterprises Inc. said that real estate investors ‘have largely pulled out.’ ‘Investors were a bigger part of the market than many thought, including ourselves,’ said Hovnanian, whose company builds primarily in the Northeast. Would-be flippers are not only not buying new properties, they’re selling what they already own, adding to the record number of homes already on the market.”
“In suburban Philadelphia, where the inventory of unsold homes has soared, Zandi asked an agent months ago how anyone could get a mortgage for a home listed at $3.2 million. ‘They were almost snooty,’ he said. ‘The girl said, ‘People who buy these homes buy with cash.’ The house is still on the market, now listed at $2.8 million.”
“Most observers say housing prices will only slide dramatically if the Federal Reserve continues to raise interest rates. If it passes 7 percent, ‘then things get very tricky,’ Zandi said. ‘Many home owners will have trouble making payments. We’ll see significant mortgage credit problems develop.’”
“‘The higher mortgage payment may lead some overstretched owners to default on payments, adding supply to an already glutted market,’ said Mario Ricchio at Zacks Investment Research.”
Been a while, Ben. But, Short sales are back.
Yes. I’ve been seeing it rise quite dramatically (from zero, anything’s dramatic) in San Diego County. I’ve been keeping track of various properties and there are more than a few who are upside-down and trying to get the lender to accept a short sale. Also, seeing some already REO/foreclosed.
When they short, doesn’t the creditor still enter a negative entry on the borrower’s credit report?
And doesn’t that entrty remain on the report for at least 10 years?
Any other comments on the effect of a short sale and the effect on the borrower’s credit?
For the last 5 years most people didn’t worry too much about what was in your credit report, all it meant was you might pay a little more interest (when Fed Funds was at 1%, 6-8% was a little more interest). So my guess is few people are too worried about their credit report, this too shall pass.
yes - this brings up a question of mine. I tried doing this for a property in Riverside County, CA the other day to see how much the loan was for a home that was sold. i have a strong inkling that the owner is upside down already. So I went to the County Clerk site for riverside county but didn’t get much further than that.
Any ideas?
“With land prices falling in some areas, Hovnanian has walked away from about $5.6 million of deposits on land parcels it had options to buy, lopping 5 cents a share off the company’s second-quarter earnings:”
They aren’t making any more land, and they aren’t buying it any more, either.
Story in Reno Gazette-Journal. Put this one in the denial file.
http://tinyurl.com/kb5qw
That
That guest columnist had a very twisted logic indeed! This convoluted statement is a perfect example:
“Gas prices and interest rates are going up and the war continues in the Middle East, but at the same time, a beautiful summer has finally arrived after a long winter.”
Never mind all the blood and carnage and economic disaster looming, look over there and see the pretty butterflies and flowers.
LMAO:
That is a non-sequiter and a half.
The sky is blue and there is nothing I can do.
Hmm…
http://en.wikipedia.org/wiki/Cognitive_dissonance
Oh no, they know they’re in big time trouble. RGJ has been pushing spin to the point it becomes obvious they’re trying to hide something, or appease their biggest advertisers. Even local news try to paint a rosy picture, but the difference between now and 6 months ago is not many are buying it any more. I wish I had time to tell you just how much the tide has turned here in the last 6 months. Maybe this evening……..
Yes, please do! The anecdotes shared here on the blog are a primary factor in keeping us ahead of the media!
Today’s column is by Rebecca Dickson, vice president of Dickson Realty’s Luxury Division.
No bias there.
I agree with nnvmtgbrkr. What I see on the ground is not what the local media is reporting.
“Most observers say housing prices will only slide dramatically if the Federal Reserve continues to raise interest rates. If it passes 7 percent, ‘then things get very tricky,’ Zandi said. ‘Many home owners will have trouble making payments. We’ll see significant mortgage credit problems develop.’”
You young whippersnappers are whimps ! It took 12% interest rates to start causing trouble in my day. And we had to walk to the mortage broker uphill both ways with a phonebook thick stack of income verification papers and we LIKED IT !
All these people who think that interest rates are the achilles heel are wrong. PRICES are the achilles heel, because they have soared while nothing else (interest rates, rents, incomes) has changed that much. The housing market is so overvalued that it can collapse under its own weight; it won’t necessarily take an exogenous event like rising interest rates to drive the decline.
Did you see the Vanity Fair article about Greenwich houses? Any of them yours? LOL
Good point Garcap
Garcap:
You are so right. That combined with lax lending standards, amongst other factors, are factors that have already occurred that will bring this thing down. Interest rates only play in with ARM resets.
Don’t want to get into a semantics arguement here but, while I agree with you that prices are the root of the issue, interest rates are the achilles heel. Us whipper-snappers (except us old-school snappers) appear to buy based on payment, and we buy more house for less money using exotic loans. Prices could do nothing, hell, they could even crawl upward, but if interest rates go up, so do the payments and effectively the “price”. The accelerant in this whole equation is if loan standards are tightened up. This would reduce the availability of exotic loans to most of its current users, placing them in higher payment loans (higher initial interst rate + principle) and again, effecitvely raising the “price”.
Well said. There needs to be a balance between incomes, interest rates (payments) and prices–that balance simply isn’t there right now. Interest rates going up and lending standards tightening will be what causes home prices to fall.
“…we buy more house for less money…”
This is the root of the problem, and will haunt many folks for years to come as they must heat, cool, and furnish these spaces.
Yes, but humans need to attach an exogeneous event to the collapsing of the housing bubbles to avoid any self-reflection and/or blame.
I agree, and your observation is confirmed by the recent price action of the HBs. A couple of months ago, the HBs basically moved inversely with the yield on the 10 year; recently, the HBs have fallen even as the yield on the 10 year has fallen.
Real good point. It’s because of the PRICE stupid! You are absolutely correct. You don’t even have to experience higher interest rates to crash the castle of cards. It’s a true bubble and it’s already busted. Incomes of people have not soared. Rents neither. Meanwhile municipal taxes are going up, upkeep costs are going up and up and up. The thing is already popping even with theses rates. It’s happening NOW. With all the liars around, it’s already happening.
Mo Money - I appreciate your “seasoned” view of the housing market. I don’t consider myself “that” old but anyone who is at least over 40 and has bought at least one property either in the 80s or 90s has a dramatically different outlook than many of the newbee first time home buyers.
We could almost start our own thread entitled “Grandpa/Grandma’s corner”. Open to anyone over 40 who bought homes in the olden’ days.
Grandpa, tell me another story about the housing bubble!
hehe… well, I didn’t buy a house back then, but I do recall people camped out overnight in front of an S&L, circa 1984, waiting to sign up for 8.99% (or some such “low” rate) at the time.
But then that was an America-centric manufacturing economy which could handle a fat 12% base rate… can’t do that one anymore.
“Gather around children, turn out the lights, give me my flashlight. It’s time for another scary housing bubble story. Tonights story is about an evil witch who scared harpy wives and their hopeless slob husbands into buying houses they couldn’t afford.”
Grandpaw, what was the witches name ?
“Her name was…………………..Suzanne !!!!!”
EEEEEEEEEEEEEEEEKKKKKKKKKKK !
40 is the new 20!
You got that right.
Actually, 20 is the new 40. All these new buyers will soon find themselves locked into a lifestyle and mortgage payment they can no longer handle.
“And you may find yourself living in a shotgun shack… and you may ask yourself, well, ‘how did I get here?’ “
“into the blue again, AFTER THE MONEY’S GONE…”
If grandpa doesn’t die of a heart attack before.
From the Associated Press. “Low-ball bidders, persnickety buyers and cancellations are now the rule in once-hot housing markets.”
Count me as a persnickety non-buyer…
I am also a persnickety buyer and I will not blink.
Me too!!! I worked for a builder in Texas in 1980/81 when interest rates were 16% and the builder bought them down to 13% just to move properties. This was in Killeen/Ft Hood when we had 50K+ troops!! I had no idea then that was bad…boy have I aged/wised up!!! Sumpin be said fur wisdum
I’m easy … I’m just a low-baller.
Bottom feeder…has the alarm clock ringed 2-5 years yet? No? I’m going back to sleep. Tell the sellers I said “Hi”.
OT but interesting. It looks like “car-B-ques” are back with a vengence.
http://tinyurl.com/os9r6
People are liberating the “equity” in their overpriced SUV by torching it, or trying to get out of payments since they are financially distressed.
But gas prices never go up ! Only housing goes up ! Whaaaa !
Thanks for that amazing link - I would never have guessed that this was a common occurrence.
If you can’t afford your car payments, and can’t sell the thing for anywhere near what the loan is worth, wouldn’t it be easier, safer, and LEGAL simply to stop making payments and let the vehicle be repossessed? Worst case, you’ll have to declare bankruptcy, which will put a black mark on your credit for a while, but better that than a FELONY CONVICTION and time spent in PRISON!?!?!?
If all it takes is interest rates of 7% for things to “get very tricky” than we are close to the re-set all have asked for. Most people don’t divulge what their mortgages are so figures that are tossed around nowadays are based upon what? Refi’s, new loans?? Has anybody determined the percentage of risky loans versus total outstanding loans?
Slightly OT:
http://today.reuters.com/business/newsarticle.aspx?type=ousiv&storyID=2006-06-12T212330Z_01_N12343324_RTRIDST_0_BUSINESSPRO-FINANCIAL-BANKRUPTCY-DC.XML
I don’t know the percentage of “risky” loans relative to the overall number of loans, so I can’t say how many individual borrowers will be impacted, BUT, I have heard the following a few different times in places like the WSJ:
Of the $7.8 (or so) TRILLION in home mortgages, approximately $2 TRILLION are set to begin adjusting in 2006 and 2007 (i.e. non-fixed rates–”risky” in my book). 25% is a big number. My sense though is that this is not 25% of homeowners, and of this group, there are a subset of borrowers of larger amounts that did this to take advantage of low rates. I know a few people personally who refinanced their existing loan to a 3-5 year ARM during this cycle simply because it was the cheapest money of their lives. Rates simply could not go up high enough to hurt them, simply because borrowing is an option for them, not a necessity.
Those that borrowed because they needed to in order to afford the home they bought are in trouble.
And those few who are in trouble will produce the trickle of sales at relatively low price levels compared to comps that will lead the market down.
My sense is that a number of these sales will be quiet sales from the banks that have foreclosed–as quiet as the banks can be so that people don’t know that the rest of their loans are underwater.
That was a great exchange — I believe it typifies what sets Ben’s blog apart from all other bear housing blogs. The quality of critical thinking and analysis herein is just outstanding, IMO.
Some day, and probably not far off, Ben’s name will be mentioned (if indeed he is not featured) in the biggies, Time, Newsweek, etc.
Yup.
When prices do fall from overvalued levels, they typically fall by about half the overvaluation, (economist) Richard DeKaser said. The correction usually takes three and a half years.”
So Richard, by your economic model, once a property is overvalued it stays overvalued, and “usually” does not give up more than half the overvaluation, let alone any other gains?
No overshooting to the downside? You’re predicting 2010, and all I get is half the increases from speculation taken away? aggh.
See who pays Richard his paycheck before you put too much stock into this official-sounding bit of economic wisdom. Who decides when prices have fallen back by half of the overvaluation? What keeps the price from overshooting on the downside, once everyone who thought real estate was the best place to invest their life savings has learned that real estate is the worst possible investment to hold in a declining market? Since sentiment influences demand and follows the market cycle, overshooting is a more plausible outcome than an arrested correction that only makes it half-way down to “fair-value.”
I wonder what Richard would say about Japan, which had a fifteen-year property slump with no evidence that they stopped after only falling back back half the overvaluation — atypical? If so, I feel compelled to point out that the bubble runup in our prices (since 1998 or so) was also extremely atypical as it led to the highest overvaluation of US real estate in history. I expect an atypically large correction on the downside as a result.
The prices drop halfway, and inflation takes care of the rest over a period of years. (For instance, 6 years of flat prices really represents about a 20% drop due to inflation.) I think that his statement is more or less correct; the price declines happen in the first few years followed by a few-year plateau.
your inflation scenerio assumes wage inflation.it aint happening i see major asset deflation re bond stock market.greenspand was the master but he painted himself into a corner,no wonder he retired.
You might be right: wage increases slowing coupled with a high amount of debt (now present) may lead to deflation. Japan was mentioned by a previous poster as an example of deflation. I personally don’t feel that will happen; the Fed has some room to lower rates to be more accommodating (as they did when the Tech bubble burst).
From what I can tell deflation (either the Japanese model or US Great depression) is caused by a huge reduction in the velocity of money (or whatever the kids are calling it these days) because everyone just sits on currency/savings accounts. You could have a 0% interest rate (or even the helecopter model) and not impact that until the presses really got going. That sort of issue really shackles the FED, the effectiveness of which depends on being able to make very minor adjustments and move the entire economic ship. Japan required 0% rates for the better part of 15 years and a gold rush in a neighbor to get things going again, the US took a mobilizing for all out war effort.
Prices drop halfway in the several years, and inflation takes care of the rest over a period of years of stagnant prices. For instance, six years of flat prices still represents about a 20% drop as inflation changes the time value of the dollar. As a result, just because homes are overvalued by x%, doesn’t mean that the nominal prices have to drop by x% to return to a decent valuation.
That’s right. I’ve heard the same thing from homebuilders around here, that home prices on a nominal basis generally work in a step function. Increases, followed by a period of correction as the “weak hands” are shaken out of the market, followed by those who scrape by and hold on, sweating to prop up prices, as they have psychologically bought into at least some of the equity that was/is in their home.
This time is different — more over-the-top in terms of appraisal fraud, super-low interest rates for a protracted period of time, investors buying multiple homes off their highly leveraged equity gains, cashout-financed binge consumption, complete abandonment of loan underwriting standards, and financial time bonds popularly known as exotic loans. All of these factors have pushed real estate prices to a level far above what fundamentals demand can support, and the result will be a drop in nominal prices, not a plateau, especially given all the recent blunt warnings that the Fed intends to hold the line on inflation.
Just my humble opinion, of course…
Don’t be deceived by the inflation rate or CPI. It’s a manipulated number by the BLS (Bureau of Labor Statistics). A better measure would be John Williams web site, the Shadow Government, in which he very convincingly espouses the idea that the REAL inflation rate is popping along at between 7 and 8 percent. Ask your wife how much she is spending at the food store and for other items. You can see the cost of gasoline as you drive, walk or bike to work.The idea that 20% is the sum rate is based on the phony CPI.
The most recent data point we have to work with, the 1990s decline, shows that this is false. In SoCal, the housing market gave up essentially ALL of its overvaluation (relative to inflation) by 1997. Check out the chart for 1997 to 2005 to guess what might be in store this time around.
http://www.housingbubblebust.com/92SoCalRecession.html
How soon before we start seeing HouseBQ’s, just like the SUV’s. Look for some insurance investigations. Looks like FL in for some fun tomorrow. I will be taking a gander at the news. Glad I am in a dry place.
Isn’t insurance increasing by 70% in FL this year because of hurricanes?? Isn’t Alberto becoming a hurricane? Won’t that market fall even harder??
“People are liberating the “equity” in their overpriced SUV by torching it, or trying to get out of payments since they are financially distressed.”
I don’t respond too often to this blog although I love reading all of your comments and insight.
This post reminds me of the early eighties in a small town when rising interest rates and unemployment caused financial hardship for many local people. Stolen vehicle claims spiked in this small town. Several years later some local divers found about 30 cars deep in the river. Of course all vehicles had been reported stolen several years ealier.
I also spoke with a local (at the time) who was claimed she found a guy who would get her out of a lease. All she had to do was leave a copy of her car key in an envelope with $50 on her front step and the car would be gone the next morning.
Overall the Marketwatch report makes sense and is much in line with what people her have been saying for months-to-years, with one noteable exception:
“That’s up from 64 markets accounting for 36% of housing in the fourth quarter. In the first quarter of 2004, just 1% of housing was considered overvalued.”
Say whaaaa–? This easy-money credit bubble has been building for the last 5 years –at least. At a minimum, you can trace it back to beginning of 2001, when the Fed started slashing rates down to 1%. Granted, it really started growing to grotesque proportions after 2003, but still. Only 1% of housing overvalued in 1st Qtr ‘04? Hardly.
There wasnt the major blip on the radar known as appraisal fraud back in 2004…..
So very true. Our home, purchased in 1998 had doubled by 2001. It doubled again by 2004 (when we cashed out). San Diego was ahead of the curve, but it wasn’t the only place. Our 20 year-old Sizzler waitress and her Sizzler waiter boyfriend bought a house for $400,000 in 2002/2003, I believe. No, they didn’t have rich relatives or winning lotto tickets, either.
Credit bubble, plain and simple, IMHO.
nassau-suffolk (long island) was ranked right up there at the top of the marketwatch list along with parts of CA & FL - 44% overvalued, comparable to phoenix (43%). mlsli inventory at 32,000+ and still climbing.
I would estimate that FL hurricane insurance will become prohibitively expensive. Any locals that can shed more light?
I’m a local. I think that there will be a Jules Verne-style battle between Florida government shills like Tom Galloway, who will run for governor on promises that the rest of America will pay for our insurance, and the insurance companies who would like to continue doing business here. Logically, the latter group will propose hazard zones, defined as a combination of number-of-miles from the CCL (beach) and specific areas statistically more likely to be hit, and those zones will have their premiums “adjusted” accordingly. Maybe the smiley-face term will be “New Premium!”
this is pretty darned funny (or not)
as I’m reading the comments here I notice on the right hand border of the page this ad for 1.25 FIXED RATE mortgages (I’m NOT kidding)..so I click the linkand find this:
Rates starting at 1.25% interest
We qualify 99% of our customers
Bad credit……….. No problem
Just fill out the Quick Quote box
on the right hand side. and one of our Sr
Loan Professionals will call you with in
6 hours
…guess they haven’t tighened up those lending practices QUITE YET!
yikes….
made me laugh pretty hard though, considering this ad is alongside the best sight on the web for WARNING people about just this sort of loan…you go GOOGLE!
Just let Ben take their advertising money.
Keep clicking on those perversely ironic ads.
“Most observers say housing prices will only slide dramatically if the Federal Reserve continues to raise interest rates. If it passes 7 percent, ‘then things get very tricky,’ Zandi said. ‘Many home owners will have trouble making payments. We’ll see significant mortgage credit problems develop.’”
COME ON LUCKY SEVENS!!!
“A growing percentage of U.S. housing markets are “extremely overvalued” and are at risk of falling prices, according to a study based on government data released Monday by Global Insight and National City. In the first quarter, 71 housing markets, representing 39% of all U.S. housing, were deemed to be ‘extremely overvalued’ based on median sales prices, median income, population and historic values.”
Nope — there is no national housing bubble in the USA. Move along, people…
Overheard an interesting conversation this morning between some blue-color type staff at a local hospital. They were talking about the bad economic times coming, what with the increase in foreclosures and so many people having purchased recently with IO/ARM loans. Must have been something on the local news last night. The tide is definitely turning here on the Central Coast! As recently as January, people were telling me that rich people from the Bay Area would keep prices high forever . . . .
Don’t go to bed,
With no neg-am on your head
No, no, don’t do it.
Don’t sign on that line,
If you can’t pay on time,
Yeah, don’t do it.
And keep your eye on the sparrow.
When that equity squeeze gets narrow.
Don’t do it, don’t do it.
Now where can you go,
Where the cold winds don’t blow
Don’t do it, don’t do it.
I live in south florida on the east coast between miami and fort lauderdale, and my homeowners insurance (state farm) went from
1400 to 2800.
and they want to increase it another 1000 or more by next year. when I bought my house in 1990 it was 330 per year. fortunatly I saved enough to pay off my house and I will cancel it asap. and take my chances. my house was built in 1962 and never had any hurricane damage. last hurricane I didn’t even lose a shingle.
Way to go! Same reason I run liability only on my car, no doubt. I try to starve the beast whenever I can.
Bearnanke wrote, ” interest rates are the achilles heel. Us whipper-snappers (except us old-school snappers) appear to buy based on payment, and we buy more house for less money using exotic loans.”
Bernanke, your problem is not interest rates. It’s that your generation can’t make decision (the more the bling the more the sting) and when you do it is only based on ‘HOW MUCHA MONTH IT AGONNA COST ME’…..only you guys never counted on those payments goning up…….
“California and Florida accounted for 17 of the top 20 overvalued markets, economists at the two firms said.”
I zillowed the house I sold in 1996 at $80,000 in military town Ridgecrest. The house originally cost $96,900 and I put in a $2000 front yard landscape shortly before I sold to make it salable. The Zillow price? $200,000. I looked at the graph and the price zoomed in the last 21 months almost straight up. Same thing for the parents’ house I sold in Fresno for $75,000. Its zillow value zoomed almost straight up since 2004 and is estimated at $268,000. Both, California places. For my parents’ house, I laugh at that value. It is in a crime-prone neighborhood in an industrial area and that house was built in 1958. My own house was built in 1990. In Ridgecrest, however, I think my former house can be fairly valued at $150,000. You see, there was a BRAC (Base Realignment and Closure) in 2005 (with little fanfare) and the military base is going to double in civilian and military employees. So the price is justified. But I’m way better off for getting out of Ridgecrest. If I stayed there, my annual income would be less than half my current annual income. My net worth has been growing by leaps and bounds since I left that town in 1996 and I have rented ever since!
Renters rule! Frugality is the way to financial freedom in the upcoming credit crisis. Coming to a town near you!
Only with leverage can you earn 500% easily and lose 4000% even easier.
“WASHINGTON (MarketWatch) — A growing percentage of U.S. housing markets are “extremely overvalued” and are at risk of falling prices, according to a study based on government data released Monday by Global Insight and National City”
The 10 most overvalued U.S. home markets
1. Naples, Fla.
2. Salinas, Calif.
3. Port St. Lucie, Fla.
4. Merced, Calif.
5. Bend, Ore.
6. Stockton, Calif.
7. Punta Gorda, Fla.
8. Santa Barbara, Calif.
9. Madera, Calif.
10. Riverside, San Bernardino, Calif.
Riverside?San bernardino came in at 68 % overvalued. OH really? Maybe lack of high paying job sectors(there is not one high-tech corporate park in all of this area, period!)
What the Riverside/San Bernardino region(known as the Inland empire) has is an ever -growing supply of new SFH tracts and developments. Just trace the route of the 15 frwy all way fron San diego to Barstow. New urban growth is sprouting off this freeway like a plankton bloom: Temecula valley and corona region along the 15 have at least 15 mega-housing projects in process. next along the chain is norco/mira loma.
From Ontario north along the 15 thru Rancho Cucamonga new housing tracts spread out both sides of 15, and at juncture of new hwy30 the new house tracts spread east west almost across entire length of the newly-built freeway 30.
Inland empire 68 % overvalued! I’d say 100 % or more. Most new jobs created in IE are from construction, which is the major(only) high-paying sector in IE. When this disappears with onset of RE Meltdown the IE unemployment skyrockets to 10% or more, pulling down RE with it.