Not Just Subprime ( Again )

When the financial press discuss the severe (but now perhaps abating) credit crunch, they act as if the temporary panic and the subprime mortgage problem was the only problem for the U.S. economy. But as I told you recently, it's more than that. It is fundamentally a general housing bubble and excess debt problem.

Here is another piece of evidence for this: the market for luxury homes are also weakening dramatically.

And things should get worse for the luxury housing markets, particularly in New York, where financial workers do much of the buying. This is indicated by rapidly increasing financial sector job cuts. So far this year, financial sector job cuts are 75% higher than all of 2006. One quarter of those job cuts was announced during the first three weeks of August, and today Accredited Home Lenders announced another 1,600 job cuts and Lehman 1,200 job cuts. And those numbers do not include the recent First Magnum Financial bankruptcy, which means the loss of an additional 6,000 financial jobs.

Meanwhile, Wall Street bonuses are likely to get cut for the first time in five years.