by Calculated Risk on 4/23/2006 03:15:00 PM

This is the Night and Day of housing.

Fleck (aka Bill Fleckenstein) writes for MSN Money: The housing bubble has popped

And Orange County Real Estate broker Gary Watts provides his view: Housing's #1 fan. Last week, I acknowledged Watt's on-target 2005 prediction, but I think he is wrong about 2006. From Watts:

I am sticking to my 15% gains for resale housing in 2006.
...
I believe that a lot of sellers who were planning on listing their homes during this summer, "jumped-the-gun", thinking that they should get their homes on the market during the spring, when there are an usually large build-up of buyers. If this is true, we will not see the usual increase of our summer listing inventory. If in fact this happens, we will have an "Inverted Year". Usually we have a lot of buyers and few listings but this year, I am betting that the listings will decrease by summer (rather than increase) and more buyers will be in the market, especially with the Fed announcement that the interest-rate increases are finished. This will create more real estate sales activity in the latter half of the year rather than the usual torrid pace of the spring.

From Fleck:

Reports of falling sales and investors stuck with properties they can't sell are just the beginning. Property owners should worry; so should their lenders.
...
To me, it's not debatable that the real-estate bust is starting to gather steam. The top was approximately when Time Magazine published its June 12, 2005, cover story: "Home $weet Home: Why We're Going Gaga Over Real Estate".
...
After having leveled off for a while, the real-estate market is now starting to slide. We're seeing signs of sales slowing and inventory accumulating, which are all quite classic ...

It is indeed the financial institutions that are most at risk in the real-estate market (which is not to say that consumers and speculators won't get hurt). The lenders will bear the brunt of the pain, because in many cases, they loaned the entire purchase prices of many homes. As I have said often, the housing bubble has been more a lending bubble. It will be the impairment of the financial institutions that will stop the flow of credit to the real-estate market. In turn, that will accelerate the collapse in house prices somewhere along the way.