Now, those million $ homes are a noose around people's necks (the link is to an article about a professional, single mother from Westchester County, NY living in a former multi million dollar home and working in Manhattan, and just scraping by on $300,000 per year... I wish it were a cautionary tale... now it is merely standard circumstances). The banks, the homeowners, Wall Streets economists, the Fed, etc... are all in denial about this simple fact: The securitization market that funded these silly consumer items is down for the count, and will not be back in my life time (if ever).
(A brief explanation of the securitization market: The banks are nothing more than servicers of these mortgages - they accept payment and make sure that that payment is divided up amongst the suckers that bought bonds backed by trauches of these mortgages. These suckers WERE the securitization market - and they have been demolished financially. Once bitten, twice shy as it were.)
There is ZERO financing available for these properties - and we built gazillions of them - the supply/demand circumstances could not be worse. I listen patiently (and with no small amount of sadness) when I listen to folks speaking of the "equity" they believe they have left in these "White Elephants". The sad fact is that they are upside down - they owe more than the house is worth - and many of these homes actually have ZERO or negative value. Sound preposterous? 5 years from now, these properties will remain unsold, and many will be abandoned, if I am correct. I think that that is pretty much the definition of "ZERO or negative value". But the outrageous property taxes will continue to wipe out the inhabitants.
This is the tidal wave that is still to come, the tidal wave that will absolutely, positively wipe the floor with those holding the paper. As of yet, no one has marked these to market - because THERE IS NO MARKET. Measuring the number of HOUSES is silly... measuring the amount of aggregate mortgages defaulted is the issue. 25, $200,000 houses = 1, $5,000,000 house as far as the system is concerned. The number of Mansions and McMansions that are going into default is truly fantastic. Did I say "going to default"? Sorry, many have already defaulted, and the banks and mortgage holders are not foreclosing because they KNOW that there is no one out there to sell the property to.
Here in South Florida, home of the mortgaged mansion, we have thousands upon thousands of these properties that have not seen a mortgage payment in years - yet the mortgages are being carried on the books of the servicing companies at full value. This is also true in commercial mortgages.
The credit crisis is still very much with us. Just try and get a $1 Million+ mortgage. Fannie and Freddie won't do it. Bank of America, JP Morgan Chase, and Citi (HAHAHA!!) won't do it. GMAC won't do it. AIG (LOL!!) won't do it... I think you get the idea.
Mortgage rates might be cheap - if you could get a loan. But the only loans getting done are being backed by FHA, and they are not guaranteeing $1 Million+ mortgages (and they are the next bailout in any event).
The stimulus monies found their way easily into liquid markets like commodity and equities. Small business? Where 2/3's of America's new jobs come from? Not so much.