Two years ago I predicted we’d soon see 5 million foreclosed/distressed homes, 5 million REO/investment/2nd homes languishing on the market and lender/thrift losses of $500 billion. I seem to have undershot the losses, but how many analysts/pundits/ media types are on record in April 2006 with predictions like these?
Foreclosures and Financial Ruin: How Bad Will It Get? (April 26, 2006)
How Many Foreclosures Will Hit the Market? (May 1, 2006)
I went on to posit that the Pareto Principle suggested that a mere 4% of homeowners could influence 64% of all housing’s value: Can 4% of Homeowners Sink the Entire Market? (February 21, 2007)
And here we have it: The delinquency rate for all mortgages climbed to 5.82 percent in the fourth quarter. Since housing has in aggregate dropped some 15% since I wrote that entry, it certainly seems to bear out a 4/64 Pareto effect.
The Pareto Principle we are familiar with is the 80/20 rule: 20% has an outsized influence on the 80%.
Interestingly, there are 20 million vacant dwellings in the U.S., of which only 7 million are vacation homes. So much for any perceived “shortage” of housing, of any type.
**Will Delinquencies Trigger a New American Revolution? **