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LA_Renter
ParticipantThats all fine for those who dont have sub prime loans. But what about the lenders left holding the bag. The lower credit lenders are vanishing and the little that remain will drastically increase lending standards. Not to mention added supply of homes getting foreclosed on coming to market. Demand for houses will drop and prices will follow subtracting equity from all homeowners prime and subprime. recent purchases with low down payments will go to negative equity, and there will be further increases in foreclosures.
Participant“why do the media, and folks like you, latch on to this marginal titillation?”
I don’t know if you have noticed but subprime is going into a meltdown!!
“The mortgage market has been roiled by a sharp increase in bad loans made to borrowers with weak credit. Now there are signs that the pain is spreading upward.
At issue are mortgages made to people who fall in the gray area between “prime” (borrowers considered the best credit risks) and “subprime” (borrowers considered the greatest credit risks). A record $400 billion of these midlevel loans — which are known in the industry as “Alt-A” mortgages — were originated last year, up from $85 billion in 2003, according to Inside Mortgage Finance, a trade publication. Alt-A loans accounted for roughly 16% of mortgage originations last year and subprime loans an additional 24%.
The catch-all Alt-A category includes many of the innovative products that helped fuel the housing boom, such as mortgages that carry little, if any, documentation of income or assets, and so-called option adjustable-rate mortgages, which give borrowers multiple payment choices but can lead to a rising loan balance. Loans taken by investors buying homes they don’t plan to occupy themselves can also fall into the Alt-A category.
Borrowers who take out Alt-A mortgages are considered less risky than subprime borrowers because of their higher credit scores. But as the housing market cooled and loan volume declined, some lenders lowered their standards for Alt-As. Now a rising number of borrowers who took out these loans are running into trouble.Data from UBS AG show that the default rate for Alt-A mortgages has doubled in the past 14 months. “The credit deterioration has been almost parallel to what’s been happening in the subprime market,” says UBS mortgage analyst David Liu. The UBS report contrasts with testimony Federal Reserve Board Chairman Ben Bernanke gave to Congress yesterday. “Our assessment is that there’s not much indication that subprime issues have spread into the broader mortgage market,” Mr. Bernanke said.”
Subprime and Alt-A comprise 40% of originations. It sounds to me like there are alot of Mr. Dulana’s out there. That was the purpose of the post, how many?
ParticipantO K, I misspelled California, but you get my point.
ParticipantI found this quote on a CNN article;
But Dean Baker, the co-director of the Center for Economic and Policy Research and a leading proponent of the theory that there has been a bubble in housing prices, says that he believes it could take five to seven years before prices get back to their highs on a nominal basis.
If prices are adjusted for inflation, he thinks that prices will never recover their recent highs.
“If you look at historical data, home prices have stayed pretty much flat in real terms, maybe being a few percentage above inflation or income,” he said. “That’s why the run-up in prices the past eight years was so peculiar. And the run-up is what created the bubble.”
Prices will never recover their recent highs when adjusted for inflation. Sounds like like Nasdaq 5000 doesn’t it. You will probably see the most severe nominal price drops late 2007 into 2008, then the forces of time and inflation will bring the market back to equilibrium. Common Sense dictates there is enough here to send the economy into recession. There is a legitimate debate on the degree (mild or severe?). This whole thing has thrown a wrench into a fiscal conservative’s-like me life. But it is what it is.
ParticipantHere is a link to patrick.net’s blog. This was actually the first bubble blog. This is primarily focused on the Bay area.
ParticipantI’m with you Perry. I knew this was off in the horizon, I did not expect this to come down like a sledgehammer.
ParticipantBoy, the mainstream media found a new story here didn’t they. Here is another link
http://money.cnn.com/2007/03/05/news/economy/subprime/index.htm?postversion=2007030516
The NAR and CAR can’t spin their way out of this one. This will hit hard!
ParticipantKeep your eye on the stock market and listen for the “R” word. Right now many people still feel safe to make a home purchase even with these idiotic fundamentals. Currently there are many rumblings on Wall Street about the impact of the subprime meltdown on the US Economy. I think most people on this board know there are alot of bad loans out there right now. IF we see a major stock market correction and the mainstream media picks up the “we are going into recession” narrative, with the spotlight being on the mortgage industry, I have a feeling that will sideline alot of people considering a home purchase. This is the moment I have been waiting to see and in all honesty I have know idea what to expect.
ParticipantI think by the end of this year it should be a little bit more clear how this market will play out. It seems we are all walking through the fog right now. I haven’t seen any thing of real substance to change my bearish stance. The reason for that is the back drop of this market. Many of my primary concerns seem to be unfolding right now. The unwinding of the yen carry trade, the implosion of sub prime lending, the steady trickle now running stream of foreclosures. All of these things are working against the market and I don’t see many of these trends improving as far as the eye can see.
It will be the inevitable economic slowdown that will have the biggest impact on housing. We haven’t entered that stage just yet. A recession or even a near recession will reduce demand, home prices as pointed out by this blog and many others are still disconnected from traditional fundamentals, the source of liquidity that made recent home appreciation possible is drying up, and we see the rumbling of NOD’s and foreclosures as these exotic loans reset. As many pointed out the past couple of years this is a slow process due to the nature of homes verses stocks. In my mind nothing has really changed.
Participant“I think we have to wait until spring/summer and see what’s going on then.”
I agree totally. the housing market generally goes into hibernation in the winter so it is difficult to determine a true direction. This also allows the perma bulls to get on their blow horns and tell everybody the bottom is in, the downturn is over, blah, blah blah. Homebuilders took a big hit in the past couple of days and I think that sector will be volatile throughout the year (I will not short those stocks, too crazy for me). I remember this time last year focusing on the ballooning inventories and the first true downturn in YOY sales. That was stage 1. This year I am focusing on the NOD’s and foreclosures, and actual prices. This will be stage 2. The real carnage will occur with the inevitable downturn in the economy. That could come into full force late 2007. 2008 will be the ugliest year. Nothing has changed in my mind since I noticed this bubble in 2004. This is playing out like clockwork.
ParticipantLooks like The West is getting pummeled. This is from The Street
“At a pace of 937,000 in the month, home sales fell from the revised December rate of 1.12 million, the Commerce Department said Wednesday. Economists expected 1.08 million sales. The sales were down 20% from a year ago.
In the West, which includes previous red-hot housing markets California, Arizona and Nevada, sales fell 37% from December to January. The region experienced a 50% decline in sales year over year.”
ParticipantWould it be anymore hypocritical than siding with this GOP. The current administration has the cloak of conservatism but they are anything but, they just want to replace the lefts big government with their own big government which is being forged by religious fundamentalist. They make LBJ look frugal and have recklessly increased our debt. I am for keeping the American people secure but I have never seen such zeal to take away our freedoms in the name of that security. The degree that we give up our freedoms is the degree that the terrorist win. Here is an excerpt from General Tommy Franks from 2003, and the “successfully led the U.S. military operation to liberate Iraq” quote is very much in question in 2006.
“Gen. Tommy Franks says that if the United States is hit with a weapon of mass destruction that inflicts large casualties, the Constitution will likely be discarded in favor of a military form of government.
Franks, who successfully led the U.S. military operation to liberate Iraq, expressed his worries in an extensive interview he gave to the men’s lifestyle magazine Cigar Aficionado.In the magazine’s December edition, the former commander of the military’s Central Command warned that if terrorists succeeded in using a weapon of mass destruction (WMD) against the U.S. or one of our allies, it would likely have catastrophic consequences for our cherished republican form of government.
Discussing the hypothetical dangers posed to the U.S. in the wake of Sept. 11, Franks said that “the worst thing that could happen” is if terrorists acquire and then use a biological, chemical or nuclear weapon that inflicts heavy casualties.
If that happens, Franks said, “… the Western world, the free world, loses what it cherishes most, and that is freedom and liberty we’ve seen for a couple of hundred years in this grand experiment that we call democracy.”
Franks then offered “in a practical sense” what he thinks would happen in the aftermath of such an attack.
“It means the potential of a weapon of mass destruction and a terrorist, massive, casualty-producing event somewhere in the Western world – it may be in the United States of America – that causes our population to question our own Constitution and to begin to militarize our country in order to avoid a repeat of another mass, casualty-producing event. Which in fact, then begins to unravel the fabric of our Constitution. Two steps, very, very important.”
Franks didn’t speculate about how soon such an event might take place.
Already, critics of the U.S. Patriot Act, rushed through Congress in the wake of the Sept. 11 attacks, have argued that the law aims to curtail civil liberties and sets a dangerous precedent.
But Franks’ scenario goes much further. He is the first high-ranking official to openly speculate that the Constitution could be scrapped in favor of a military form of government.”
L Thek in the event something like this happens, are you going to be leading the charge in favor of a military form of government?? Are we not trotting down this path now? How can America defend Liberty if we lose it on our own soil?
ParticipantI’m actually not a leftie, more of a libertarian although I find myself siding with lefties this election cycle. Feels kind of weird actually. I agree with you evangelicals will pick up and move on, I just think many will rethink exactly how involved in politics should they be. Evangelicals are in the business to save souls not win elections. I think their is a rift that is going to play out in that community and this pastor with the gay prostitute thing could be the spark of that debate. There is also a rift in the GOP about the role of evangelicals and libertarians like myself. Dick Army wrote an excellent op ed in the Washington Post about this fissure. Its called “Where We Went Wrong” here is the link, it’s an interesting read. There are going to be many heated discussions inside the big tent.
http://www.washingtonpost.com/wp-dyn/content/article/2006/10/27/AR2006102701482.html
ParticipantThis is obviously a big story, this Haggard guy is the president of the National Association of Evangelicals which has about 30 million members, that is 10% of the nation’s population. And you are right lostkitty he met on a regular basis with Karl Rove and George Bush. This is a key and critical voting bloc of the GOP. Right now that voting bloc has just been hit in the stomach. If Evangelicals do not come out and vote the GOP is toast, more than it already is on Tuesday.
The history of Evangelicals is that they shied away from politics after the Scopes trial in the 1920’s. They decided Government was something to be left to politicians. It wasn’t until the late 70’s that they became active again in reaction to the social chaos and changes of the 60’s. That fueled the rise of Reagan in 1980 and was a major factor in shifting the country’s politics to the right. Karl Rove identified that although evangelicals were voting in greater numbers there were still a large number of evangelicals not voting. So the GOP carved out wedge issues to attract these new potential voters such as abortion and especially gay marriage. And they took the bait. IMO the end result is not that desirable given the we are so polarized as a country right now. I’m sick of this red state, blue state crap. The revelation of Mark Foley, this very prominent leader of the evangelical movement along with the other scandals and corruption of the GOP could mark a shift in how evangelicals view the world of power politics. So there is alot more going on here than meets the eye.
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