Housing Bubble Bursting?

[Randolph Kinney]

Adding to Scott's post, the idea of pooling is to dilute or distribute the risk. However, when leavage is used to repackage the instruments or to create a fund that buys CDOs and the like with borrowed money, instead of spreading the risk and lessening the bad effects, it serves as a multiplier or concentrator of bad effects.

It is how you can have $100 billion of subprime mortgages producing $400 billion of real losses.

 

[Randolph Kinney]

Something new? Defaults are spreading

Containment spreading fast in housing bust: James Saft

From the beginning, Fed officials and others have preached "containment" on the housing debacle: first that its effects would be confined to subprime borrowers, then to locations, such as California, and finally that the damage would not spread too far within the economy.

"It's interesting to note here that problems in these markets, really for all lenders, seem to be across the board without regard to originating FICO, the type of loan or the condition of the property," Wachovia chief risk officer Donald Truslow told analysts on a conference call.

A close look at the latest loan delinquency figures from FirstAmerican LoanPerformance bears this out.

The figures, which are only through July before the worst of the housing credit crunch hit, show that late payments, a red flag for eventual defaults, are rising across the board. What's worse, delinquencies are accelerating faster in some "safer" segments than they are in the subprime sector, which caters for those with poor credit histories.

 

[Randolph Kinney]

Any one notice IndyMac stock price?

IMB closed at $13.16 today, down 9.62%.

CFC closed at $15.05 today, down 4.02%.

It seems the market is judging Countrywide to be the better of the two. What's going on with IndyMac?

 

[Pamela Crowley (Florida)]

Count how many house are sitting vacant, then possibly double that for expected delinquencies in the next 1 year??? I wonder how many more that are currently rented will also end up in foreclosure. Some (many?) of those speculators cannot get enough rent $ to cover the payments, let alone any maintenance.

Almost ALL are in trouble, just some more than others. Most tossed out the competent and ethical appraisers and underwriters, and I'm not at all surprised that it's well beyond the sub-prime.

 

[Greg Bell]

Yes , put Apple is booming so buy buy buy those stocks , talk about a bubble..

 

[Austin]

I just got around to reading yesterday mornings news paper. They posted the name and addresses of every delinquent property real estate tax account in the city. There were 10 full pages of full size newspaper pages full of names. This is a town of about 47,000 people with about 22,000 parcels. The city is hurting for money and is putting the pressure on. Those 10 full pages must have cost them $15,000 or so.
The state of Virginia is 600 million dollars in deficit and is resorting to traffic tickets to raise revenue. All this with a good economy. What is going to happen when the economy retracts?

 

[Randolph Kinney]

More chickens coming home to roost

Merrill Posts First Loss Since 2001 After $7.9 Billion Subprime Writedown

Oct. 24 (Bloomberg) -- Merrill Lynch & Co. reported the biggest quarterly loss in its 93-year history after $8.4 billion of writedowns, the most by any securities firm.

The third-quarter loss of $2.24 billion, or $2.82 a share, was about six times higher than the New York-based firm estimated on Oct. 5. Merrill wrote down the value of subprime mortgages, asset-backed bonds and loans to finance leveraged buyouts, and Chief Executive Officer Stanley O'Neal said in a statement today that he is ``working to resolve the remaining impact from our positions.''

Merrill said its holdings of so-called collateralized debt obligations, or CDOs, along with other securities and loans linked to subprime mortgages, lost $7.9 billion of their value in the quarter.

 

[Randolph Kinney]

More chickens, more losses coming home

Ambac Reports First Loss After Writing Down Value of Subprime Securities

Ambac Financial Group Inc., the world's second-largest bond insurer, reported its first quarterly loss after reducing the value of subprime mortgage-linked securities the company guarantees by $743 million.

 

[Randolph Kinney]

Subprime woes killing tax revenue for California

Subprime Shatters Schwarzenegger Fiscal Discipline on California's Credit

Four years after Arnold Schwarzenegger was elected governor of California, vowing to ``tear up the state's credit card,'' the actor and former body- builder is about to charge $7 billion to taxpayers' accounts.

California is selling notes tomorrow due in eight months to help pay its bills until tax revenue comes in, the largest short-term loan since Schwarzenegger took office and almost five times more than last year. Debt is increasing after cash receipts fell $777 million below the state's projections during the first three months of the fiscal year that started July 1.

Schwarzenegger is losing the revenue cushion he used to plug budget deficits as home foreclosure rates increase at a faster pace than the rest of the country. The rise in IOUs is an early sign that finances are deteriorating after four years of revenue growth won credit-rating upgrades and spurred gains of more than 20 percent on California bonds.

``The continuing slump in the housing market has been a drag on the economy and that has a spillover effect on state revenue,'' Palmer said. ``It's very likely going to involve some very difficult decisions on the spending side.''

 

[Randolph Kinney]

Put on a happy face - NAR

U.S. Existing Home Sales Fall More Than Forecast as Housing Slump Deepens

Purchases declined 8 percent to an annual rate of 5.04 million, the fewest since record keeping began in 1999, from a 5.48 million August pace, the National Association of Realtors said in Washington. Sales were down 19 percent from September 2006 and the median home price dropped.

Home prices in 20 U.S. metropolitan areas fell 3.9 percent in July from a year earlier, the biggest such decline since record-keeping began in 2001, according to the S&P/Case-Shiller home-price index.

The number of homes for sale at the end of the month rose to 4.4 million. At the current sales pace, that represented 10.5 months' supply, the highest since record keeping began in 1999 and up from 9.6 months in August.

The inventory of single-family homes represented a 10.2 months' supply, the most since February 1988.

Gray skies are gonna clear up,
Put on a happy face;
Brush off the clouds and cheer up,
Put on a happy face.
Take off the gloomy mask of tragedy,
It's not your style;
You'll look so good that you'll be glad
Ya' decide to smile!
Pick out a pleasant outlook,
Stick out that noble chin;
Wipe off that "full of doubt" look,
Slap on a happy grin!
And spread sunshine all over the place,
Just put on a happy face!
Put on a happy face
Put on a happy face