When the Walls Come Tumbling Down

Real estage agents across the country routinely have Sunday open houses, and East Hampton is no exception. Those open houses on my street have come and gone; there has been no traffic.

East Hampton is symptomatic of many other coastal real estate markets. The hard landing in housing is upon us and, as usual, the cycle will be more extreme than expected -- just as the climb was unexpectedly high.

During the halcyon times last spring, I participated in a CNBC town hall special titled "The Real Estate Boom," in which Dr. Robert Shiller of Yale University and I debated with optimistic industry participants and housing economists about the slope of the cycle. We were in the distinct minority. Many industry insiders still see a soft landing in housing. They were, and are, wrong.

As I mentioned previously, the statistical peak in housing (measured by new-home sales) was October 2005, only nine months ago (and with a unit drop in new-home sales since the peak of less than 20%). By contrast, the average postwar cyclical downturn for housing has been between 26 to 52 months, and in units, has averaged a 51% drop.

As I wrote earlier, the worst is yet to come for housing and, with it, the multiplier effect on the domestic economy will be felt widely.