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Housing Bubble Bursting?

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MARK JOLLIFF said:
Look all I want to know is after 2418 postings IS IT BURSTING OR NOT????
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Not in my market area; although, things have cooled a little bit. This info is similar to what I've posted several times on this thread. However, now things seem to be a little cooler than they were a few months ago. Still, not a bubble burst... we never really had a bubble to start with here. And, unlike some parts of the Midwest, like Detroit, which also didn't have a bubble, we are not suffering a major decline in property values... yet.

So, Mark, I think you will have to answer that question for yourself. A large part of the answer will be determined by where you are and your individual circumstances.

If you bought a house in a hot market on an interest-only ARM, then you probably think the bubble is bursting. If you live in a market like Detroit and you were planning on selling your house and retiring, then you probably think there is a housing recession. But, if you live in a lot of places where there haven't been major fluctuations in real estate pricing and the job market is still strong, then you might wonder what all the fuss is about.

As for predictions... third quarter recession? Maybe, but if so, no one will know it until 2nd quarter next year. fo all I know, we might be entering one 2nd quarter this year. If I could predict that kind of thing I'd be a lot richer than I am.
 
Denis DeSaix said:
I'm not too comfortable with a rushed regulatory policy.
Seems like the market is adjusting now to the issue (better late than never). So what's a knee-jerk regulation going to do to change sub-prime lending policies that the market hasn't already done?

Better to let the market continue to react and spend some more time making some thoughtful policy decisions, IMO.
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They are going to expose the new sup prime regulation to public for 60 days to make a comment on it before finalizing that regulation. It seems that they want to force lenders to qualify subprime borrowers based on their ability to make the highest possible monthly payments during the life of the loan, instead of the initial lower rate.
 
That will halt a large amount of home sales driving the economy into a recession..3rd quarter for sure..
 
China Tightens Control of Banks' Foreign Borrowing

http://www.bloomberg.com/apps/news?pid=20601080&sid=aGcAfH2QQ8ds&refer=asia

March 2 (Bloomberg) -- China cut the amount that banks can borrow overseas to curb risks and stem foreign-currency inflows that have put pressure on the yuan to appreciate.


Chinese banks' quotas for short-term foreign debt will be reduced to 45 percent of the 2006 level by June 30 and then to 30 percent by March next year, the State Administration of Foreign Exchange said on its Web site today. For foreign banks, the reduction is to 85 percent and then 60 percent.


``Hot money has been flooding into the country because investors are betting on a yuan appreciation,'' said Ha Jimin, the chief economist at China International Capital Corp. in Beijing. ``The new policies are aiming at supervising and better managing the short-term foreign debt inflows.''
 
http://money.cnn.com/2007/02/28/magazines/fortune/subprime.fortune/index.htm?postversion=2007030117

When a certain $126,000 subprime loan on a $696,000 house on the West Coast failed to produce a single mortgage payment, alarm bells went off at Clayton Holdings, a company that monitors credit risk.
Closer scrutiny revealed other red flags. The borrower's previous rent payment had been $1,000, compared to the $4,482 she was supposed to be shelling out for both the primary loan and the $126,000 piggyback. And her stated income was $84,000 even though she was an hourly worker at Target.
"We do an autopsy to find out what caused the loss of blood," says Keith Johnson, Clayton's COO. "It's a CSI subprime."
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As for foreclosures, they're currently running 25 percent higher than they were this time last year, according to RealtyTrac. "We don't have high unemployment, high interest rates or a slowing economy, but we're seeing the number of foreclosure filings pushed above historic averages," says Rick Sharga, a marketing exec for RealtyTrac. "You can't underestimate the effect of higher risk loans."
Adding to the problem are jittery lenders who have suddenly begun to tighten their standards. "You're seeing credit score requirements being increased. You're seeing documentation firming up," says Bob Walters, chief economist with Quicken Loans. "Fewer people will get loans and maybe rightly so."
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Many point to last fall's implosion of hedge fund Amaranth as a sign that markets can handle these kinds of setbacks.
But not everyone finds that argument soothing. "If there is a fault line in the global financial system, it runs through the U.S. mortgage market," says Zandi. "Everyone throws up Amaranth, but that involved a small market with little implication for any other asset class. If some hedge fund blows up on a residential mortgage-backed securities investment, that has very different kinds of implications because it is the biggest chunk of the global fixed income market. So the ripples will be more like waves, and it could turn into a tsunami."
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