I've been watching this bubble for a long time, and it's frightening to see how blind these builders were going into the downturn. I've heard horror stories of buyers with $150,000 deposits that are vanishing before their eyes as Kara files chapter 11. Everyone owed money by Kara from contractors to banks and investors is similarly screwed.

Kara is the first, but will certainly not be the last as the housing bubble backlash hits.

scary to think about the kind of ripple effects this could have. plus, with the refinancing craze over, a major source of cash has now been cut-off. i fear that the worst will come when all the adjustable rate mortgages out there end up adjusting up and people's mortgage payments rise.

Agreed. The ripple efect on the economy is going to be very painful. Imagine those that work for lumber companies, concrete, etc. eventually their employers will not be able to pay them, thus layoffs.

I personally think this housing thing was a Grand Illusion. One would have been better off buying land and building in Second-Life