But the more imponderable factor is the prospect of a multi-generational change in savings and housing preferences by Americans, particularly away from pulling tomorrow's puchase into today with the use of debt. The weakness in the housing market suggests that Americans are increasingly unwilling to incur debt to purchases housing, especially when valuations remain so uncertain. We are not just talking about pushing out of the market new entrants into the home owner category, but also older Americans who are trying to maximize liquidity and safety. The smaller pool of available home buyers combined with a paucity of credit available spells disaster for the real estate, building and financial sectors in 2011 and beyond. "Rent to own" is the next big opportunity for Wall Street's titans.
We will continue to see real estate decline as people are more leery of debt. We will see corporate profits decline as consumers stop front loading future consumption with debt. All this de-leveraging will create significant deflationary pressure, and all the attempts by Federal Reserve to inflate their way out will fail. It will fail because of the shift in behavior above.