"We started the year with a more pessimistic view of the housing and home improvement markets than many. It turns out we were not pessimistic enough." ----Frank Blake, Home Depot chairman and CEO, Nov 13, 2007.

Today the Home Depot Inc. reported a 26.8 percent drop in third-quarter profits and revised its financial outlook Tuesday, saying a decline in earnings would be larger than expected as the housing market continues to deteriorate. The nation's largest home improvement store chain predicted a decline of as much as 11 percent in earnings per share from continued operations because of persistent "softness in the housing market."

Meanwhile Monday Yale University economist Robert Shiller, co-developer of the S&P/Case-Shiller Home Price Indices, told Reuters he believes the housing market's slide is by no means nearing its conclusion. Shiller said not only are forecasts of a bottom in 2008 probably wrong, but 2008 could see a decline even worse than that of 2007. "There is a probability of a continuing decline for a period of years, bringing prices in many cities down in the 10s of percent," he said. "The bottom is hard to predict. I do not see it imminent and it could be five or 10 years too."

The billion dollar question for Canada, is how long until our real estate markets follow the US market down? and how far will our Canadian property values correct? Canadians have also bought too many things on too much credit for the past several years. Every week I receive emails from Canadians that are struggling to keep their head above water and are beginning to lose the fight. Meanwhile debt ratios in many parts of the UK and Europe are even worse than in North America. The damage of this credit bubble has been pervasive and will continue to spread.

It is time for anyone who has not yet seen it to rent the movie "Fun with Dick and Jane." Jim Carey and Tea Leoni did a remake of the 1970's original a couple of years ago. In many cases, the resolution will be to give back the fancy leased cars and other financed toys and drive and live in what people can actually afford. It is not an easy adjustment, but it will be honest, liberating and ultimately healthier to let go of the facade and pay down the debt.