I hate to be a pesssimist, but...

Implications: We are very early in terms of the impact on our economy. 2008 will see more non-performing loans, and builders will go belly-up. The loss of the home ATM has taken trillions out of the economy, and with that spending gone, the impact will trickle beyond the builders, to construction material providers of commodities and equipment, as well as general employment.  We are seeing debt-laden builders trying to generate cash, and lumber companies going into bankruptcy.  2008 will be extremely difficult.  What will the impact be of a 20% drop in residential real estate prices??

Analysis: We have not yet seen much of the impact of the housing dilemma. When the agents that are still currently listed as employed start showing up on the unemployment lines in 2008, alongside the mortgage brokers, construction workers, home inspectors and others,, the problem will be much larger. This, coupled with depreciating home prices, will do some serious damage. It will not matter that the Fed floods the market with dollars, as the borrowers will not be there. Forgiving or readjusting some borrowers loans is not a solution in itself. There are nearly 1M unsold new condo's and homes sitting vacant. As the mayors stated recently, they will start causing blight in areas. Banks will take a second "hit" from the loans to builders, that will be foreclosed. I don't have the numbers, but they have to be big.