Boy did he get it right. The housing market has gone from a "correction" to a "slump," and as 2007 comes to a close, there are signs 2008 will get worse.
Experts are predicting an uglier year as inventories of unsold homes grow and a large number of adjustable-rate mortgages reset, sending more homeowners scrambling to make higher payments and pressuring the already shaky credit markets. What worries industry watchers the most, however, is the possibility that the housing troubles will plunge the economy into a recession.
"I think everyone is expecting the other shoe to fall. There's still some blood to be let," said Jim Gaines, a research economist at The Real Estate Center at Texas A&M University. "And historically, a downturn in the housing market has been a leading indicator of a recession."
The housing slump stands to exact a sizable toll on the broader economy as jobs, retail spending and credit availability could likely take a hit.
During the peak of housing from January 2003 to March 2006, the housing market helped to create 1.3 million jobs. Since then, only 500,000 of those have been lost. Another 800,000 could be on the chopping block.
Unlike downturns in some sectors, a slowdown in housing can affect jobs across many industries from financial services to construction to home furnishing retailers, said John Challenger, chief executive of Challenger, Gray and Christmas Inc.
Solid job and wage growth continues to support retail spending even as slipping home prices discourage homeowners from tapping equity for big-ticket purchases. But experts worry homeowners will become tighter with their wallets and save more as they watch their total household worth of which homes make up 39 percent - decline.
Consumer spending makes up two-thirds of the U.S. economy, and already, is showing signs of slowing down. According to the International Council of Shopping Centers, same-store sales grew by 2.2 percent from February to October, compared to 3.6 percent last year and 3.9 percent in 2005. Consumer confidence also has faltered and is near two-year lows.
"Everyone agrees that the rapid rise in home prices led to increase in spending relative to incomes," said Thomas Lawler, a former official at mortgage lender Fannie Mae who is now a private housing and finance consultant. "The question is what will the impact be on spending if equity falls."