San Diego Housing Bubble News and Analysis

Check out these links:

http://www.irvinehousingblog.com/2007/03...

http://www.irvinehousingblog.com/2007/03...

IrvineRenter, noticed that you posted the chart originally. Great find! That chart is pretty damn scary! I wish I had a crystal ball to look at the state of housing 5 years from now after all that carnage is worked through! Yikes!

That chart tells the tale. Lets see we are in month three and we have already seen 30 subprime companies go belly up. October of this year will see $50 Billion reset in that month alone. The storm has arrived.

Wow! The chart is a verifiable fountain and mountain of information. Thank you so much for bringing it to our radar screen.

I can extrapolate that the option-ARM holders (are these the ones with negative amortization loans?) would just walk away from their obligations once they are required to pay down on the principal of their undervalued POS's. Maybe they would be the most gainers financially, despite their destroyed FICO scores....

On the 66th month close to year 6 (=666?) from Jan-07 countdown, the pain and suffering would probably be unimaginable for the masses of greater fools who bought in on the greatest ponzi scheme of our lifetime.

Personally, my biggest concern would be: Would my local government pension fund still be around for me to collect? I am aware that this pension fund is involved in over $1Billion of credit derivatives, swaps, or hedge funds. Remember Amaranth?

Good luck to all.

The way I read that graph the 01/2007 numbers increase by 35% in the next 3 months and they don't come back down below that level for 15 months after that.

We can figure that the percentage of marginal borrowers among those ARMs increases faster than the sheer numbers of ARMs, and their level of sensitivity also increases. In effect, even though the numbers of resets only increase by 35% - 50%, the numbers of overstressed borrowers may double, or worse, as time goes on.

ARM reset is not bad in itself. 30 year fixed loan interest rates are still low (below 6%).The question is how many of the ARM borrowers can afford the increased payments.

Just to make sure I am reading this right. Is this correct?:

-The chart is nationwide, and starts in January 07'. We are climbing the subprime ARM bell curve right now, and we will see large numbers of resets at least for the next 24 months. Just as the subprime ARM resets start to decline, we climb the next bell curve with all the other ARMS resetting from months 29-61. Conclusion: We will be seeing massive ARM resets for the next 5 years and almost all these people have original rates much lower than the best rates today which are 30 year fixed at say 5.8%. If rates rise, it will get worse. If the economy slows, it will get much worse. If home prices continue to decline, it will get much, much worse as many of these people will be under water not only with ARMs resetting, but also HELOCs.

What's ahead:

- steep drop in consumer spending causing massive layoffs in turn causing even more foreclosures
- vanishing of 30% Real Estate related jobs (has already started in full force)
- ARMs resetting like no tommorow spawning foreclosures
- Tightening of lending standards shutting out buyers and refinance applicants
- Increasing cost of gasoline/energy pressuring budgets
- Increasing interest rates - Fed will HAVE to raise rates to counter fall of the dollar caused by foreigners dumping their US debt instruments.

The year ahead is going to be interesting!

Kev
"What's ahead:

- steep drop in consumer spending causing massive layoffs in turn causing even more foreclosures
- vanishing of 30% Real Estate related jobs (has already started in full force)
- ARMs resetting like no tommorow spawning foreclosures
- Tightening of lending standards shutting out buyers and refinance applicants
- Increasing cost of gasoline/energy pressuring budgets
- Increasing interest rates - Fed will HAVE to raise rates to counter fall of the dollar caused by foreigners dumping their US debt instruments."

YOU NAILED IT!! People ask, "what if the suckers can pay the resets?". Duh! How many billions each month would that take out of the local economies? Pay the reset or don't either way i see it, I win.

Hey, can someone verify what is included in each of these categories?

The bottom row is Alt-A ARMs. That would be Stated Income, low-doc A-credit ARMs, straights ARMs, nothing fancy. Does that include high LTV?

The next bottom is Sub-prime. We've heard loads. Low-credit, high-LTV, stated income, etc.

Then red. Prime ARMs. looking to be predominately 3 year ARMs. Straight ARMs, no options, no neg-am. Etc. normal LTV, DTI and documentation. correct?

Then white. Agency ARM. Not sure, is this VA, FHA funded ARM loans?

the light blue. Option ARMs. These are the Neg-AM, option ARM loans. Targeted resets on paper starting in 5 years so float activites in years 3,4,5. I say on paper, because if the neg-AM has been used, that date gets pulled in the on the equity cap, typically fires on a minimum payment user around month 29.

If the Neg-Am trips an early reset for the majority of people with the Option ARM loans, that may move the light blue section forward two years to begin this fall/winter. Right on top of the sub-prime peak. Am I think about that wrong?

The last is unsecuritized ARMs. Are these the ARMs that banks kept for themselves?