Some "experts" are saying that this will peak next year. I guess that depends on how one defines "peak" in this context.
Allow me to fold my "Oil imports are in terminal decline" argument in with Real Estate is not done getting trashed just yet. While Oil imports are down 10.4% this year from 2008, imports during the most recent 4 week period are down 19.3% when compared to the same 4 week period from last year.
Maybe that is a one off, an outlier, a sigma 6 event... or maybe it isn't. In fact, the last 4 weeks Oil imports have been lower than I posted would be the worst case for 2010... that is, if the rate of decline remained unchanged. If total petroleum supplied to the US economy does in fact fall by 30%+ from 2006 to 2014, said supply constraint would bite deeply into gasoline supplies necessary for commuting - something that has not happened yet (while total petroleum supplies have fallen over 10% peak-to-date, the effects have been felt almost entirely in distillate fuels for commercial applications such as trucking, air travel, and industrial consumption). In other words, both residential AND commercial properties at either end of the commuting distribution model would go to ZERO value. After all, what is the value of a property you can't get to?
It then follows that a significant write down on the mortgages on these properties is in the offing, over and above the mainstream consensus of write downs coming due to the slow pace of loss recognition. This also means that the need for ANY new construction, as well as the need for a single new car, is ZERO - which does not bode well for "job growth", now does it?
This is where it gets tricky. The above described scenario is very deflationary. Maybe. Yes, the contraction in debts written off is certainly deflationary - but does the money supply contract faster than the GDP contraction? If not, that would be inflationary, wouldn't it? See why you can't get a straight answer from anybody on this issue? And I am giving you the simple version.
In the 1930's people did not have enough money for food while farmers were dumping milk, slaughtering pigs, and sowing grain into the dirt in an effort to force prices high enough so that they could farm profitably. This was due to the extreme contraction in credit and money supply. This is no exaggeration.
While "Tech" has diversified the U.S. economy somewhat, the chant "Housing-Autos, Housing Autos, Housing Autos" still plays in the collective head our economy. We built our economic system based on the expansion of debt to fund these 2 industries, industries that will not exist as we knew them in an era of Oil supply contraction. So what are the banks going to lend against? Will we once again wind up with folks without enough money to buy food while farmers cannot earn enough to keep farming? Wait! Isn't that what is happening RIGHT NOW?
Its all about Oil imports. Either they continue to decline, or they do not.