So it begins!!

[capeman]

The 100% lending spigot from the largest US mortgage lender is officially turned off. Now we will see the major price corrections beginning. Any bets on San Diego declines by EOY 07? I’m betting 20-25% YOY by December!!

http://money.cnn.com/2007/03/09/real_estate/countrywide.reut/index.htm?postversion=2007030917

[PerryChase]

Subprime mortgage woes may be spreading
Losses are creeping up on so-called Alt-A home loans

SAN FRANCISCO (MarketWatch) – Problems in the subprime mortgage business may be spreading to other parts of the home loan market.
Losses are creeping up on so-called Alt-A loans, which are considered less risky than subprime mortgages, but may have lower credit quality than “prime” loans.
That’s sparked concern among investors in companies such as IndyMac Bancorp, Countrywide Financial Corp, and even General Motors.

Subprime mortgages are offered to lower-income borrowers with spotty credit records. The sector has descended into crisis recently as rising interest rates and stagnant home prices have left more borrowers struggling to meet monthly payments.

http://www.marketwatch.com/news/story/subprime-mortgage-problems-may-spread/story.aspx?guid=%7B664D15E5%2D33EA%2D41AB%2DBAF7%2D116BBF929245%7D&siteid=yhoo&dist=yhoo

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Subprime Defaults Are `Beginning of Wave,’ Bies Says (Update5)

By Alison Vekshin and Anthony Massucci

March 9 (Bloomberg) — The nation’s banks are just beginning to feel the pain of defaults on risky mortgages they made at low introductory rates when housing prices were soaring, U.S. Federal Reserve Governor Susan Bies said.

http://www.bloomberg.com/apps/news?pid=20601087&sid=a7iLhjv5Z7Pg&refer=home
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Banks are just beginning to feel the pain….. Wait ’til they really feel it.

[davelj]

I loved this quote: Outside of the housing and auto industries, “the economy is strong,” Bies said.

Right, I mean other than the fact that I have cancer, my health is pretty good.

(No, I don’t really have cancer.)

[JWM in SD]

How many many of these changes in lending standards and imploding subprimes will it take before the permabull clowns finally begin to understand that the party is over?

[davelj]

The permabulls will only respond to dramatic, real-time price change data. For example, if the median P/SF in San Diego falls by 10% (or thereabouts) this year (and next) – that will be real and undeniable. Anything else is just conjecture in their minds.

Lots of internut investors were buying the Nasdaq at 4500, thinking it was an opportunity to buy on the dip after the index had been at 5000. When it had declined to 2500, the permabulls were nowhere to be found. The same will happen with housing, albeit on a different magnitude.

[Duck]

Contrarion View. Bill Miller is probably the 2nd greatest value investor of the last half century behind Warren Buffett.

http://money.cnn.com/2007/03/09/magazines/moneymag/funds_subprime.moneymag/index.htm

FYI, my forecast is a 5 % overall median drop, but in reality a flat market for premium neighborhoods and a 10-15% drop for the less desirable areas as that is where the bulk of the no down subprime sales are.

[davelj]

My headline for Bill Miller:

“Investors Rejoice as their Chosen Coin Flipper Improbably Advances Another Round”

(Miller isn’t in the same ballpark as Buffett… not even the same city… nor is he even close to being second.)

[kev374]

Even 5% of a $500,000 loan is $25,000. Someone would have to save $1000 a month for over TWO YEARS to reach that. Now people will realize the true worth of money!!

[PerryChase]

Cow_tipping made a very good point on subprime on the OC tread. I’m putting the feedback here to keep the topics in order.

Here’s what he said about subprime.
—————
Nationwide its ~10% of total outstanding mortgages by number, not amount, but number. However that includes the 30 yr mortgages that originated in 1977. Last 3 years the sub primes were much much higher and that is nationwide. CA presumably has much more jumbo, alt A, subprime and no doc, and heck lots of super stretch mortgages as in someone who can get a 300K house, cant find one for 300 so he gets a 800K house hoping he’d be bailed out when his house triples in value. Huge huge numbers. And surprisingly, 2% is enough to crash the market. Housing without someone living in it cost you a lot …
Cool.
Cow_tipping.
—————–

That’s an excellent point. The most recent mortgages in California are mostly subprime. Massive defaults on the mortgages issued the last two years may well crash the market.

[waiting hawk]

Don’t forget about all the suckers that now cannot refi to keep the game running for another 2/28..

Don’t delay the inevitable.

[PerryChase]

Lenders are stopping the 100% financing. What happens when homeowners need to refinance because their loans reset and they can no longer afford the payments?

1) They can’t get financing because there are no loan products available. And the house won’t appraise at a higher value.

2) They can’t sell because they have no equity. 6% of a $600,000 house is $36,000. Can sellers come up that the cash on closing?

I see foreclosures on the horizon…..

[Author]

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