Housing Bubble Bursting?

[Randolph Kinney]

2 million subprime-mortgage foreclosures are on the horizon by 2009

2 mln subprime foreclosures

WASHINGTON (MarketWatch) -- Two million subprime-mortgage foreclosures are on the horizon by 2009 if home prices continue their downward spiral, a congressional report said Thursday. A report by the Joint Economic Committee also estimated that $71 billion in housing wealth will be destroyed and states will lose $917 million in property tax revenue. The report was released by Joint Economic Committee Chairman Sen. Charles Schumer, D-N.Y., and other lawmakers. They called on the White House to beef up foreclosure prevention counseling, to let Fannie Mae and Freddie Mac buy more loans and to encourage loan servicers to work out modifications with borrowers.

 

[Randolph Kinney]

Magnitude of loss in mortgages and real estate value

Reports Suggest Broader Losses From Mortgages

At this juncture, economists say the troubles in the mortgage market could, all told, cost financial firms and investors up to $400 billion. That is far more than the roughly $240 billion cost, adjusted for inflation, of the savings and loan crisis of the early 1990s, according to estimates of the combined financial toll of that crisis on both the federal government and private sector. The loss in total real estate wealth is expected to range from $2 trillion to $4 trillion, depending on how far home prices fall, according to several economists.

 

[Randolph Kinney]

Should people worry about the FED's monetary policy?

Extreme Hyperinflation -- Weimar Style

A German woman feeding a stove with an enormous pile of paper currency notes, which burn longer than the amount of firewood they can buy. Hyper-Inflation happens when a paper currency with no backing, other than hot air, begins to deflate. This phenomena occurs when government excesses destroy the faith-based value of a FIAT currency.

 

[Austin]

http://www.omaha.com/index.php?u_page=1208&u_sid=10167488

Published Thursday | October 25, 2007
Buffett says mortgage ills might linger


DAEGU, South Korea (AP) — American billionaire investor Warren Buffett said Thursday that problems in the U.S. subprime mortgage market will likely weigh on consumers for up to two years but that the U.S. economy will weather the storm.

The subprime problem "is having an impact," Buffett said on his first visit to South Korea. "It will have more of an impact."

Rising default rates among U.S. mortgage holders with poor credit histories have rattled global credit, stock and currency markets since August and raised concerns about a possible recession in the U.S. economy, a major export market for Asian companies.

 

[Randolph Kinney]

I really cannot say that Buffett saw this coming. All his previous pronouncements were subprime mortgages would have a minimal impact on the economy and the markets.

So much for the sage from Ohmaha. :new_all_coholic:

 

[moh malekpour]

Bulls don't get it on housing , We have them here too

http://www.thestreet.com/s/kass-the...using/newsanalysis/newsonthego/10386473.html?

On housing, I expressed the view to the panelists that leaning on the Fed with shock and awe (again) next week would have little positive effect on the housing markets, just as the last 50 basis point had no impact (as housing statistics continue to move lower). The affordability issue remains unresolved, and the inventory of unsold homes remains at record levels -- and, according to traffic readings, looks to worsen in the months ahead.

As to Dennis' remarks that most consumers are well off after the long rise in home prices, I expressed the view that the problem was the mortgage loans that were made at the margin over the last three years; they are coming back to bite the homeowner in mortgage rate resets in lower home prices and in a difficulty getting a loan as the originating business evaporates.



Jim Lacamp expressed the bullish view that the housing market will be "ring-fenced" and will not spill over into the economy or capital markets and that the fact that the markets are where they are is proof positive of the market's strength. He used the metaphor of "rope a dope" as an expression of the market's continued vigor. That reminds me of something that Jeremy Grantham recently wrote in this month's GMO Quarterly Letter

 

[moh malekpour]

When Will Housing Bottom?

http://www.safehaven.com/article-8696.htm

Those looking for a housing bottom anytime soon are likely to be disappointed. Let's see why from three different angles:

Mortgage Rate Resets in Conjunction With a Consumer Led Recession
Historical New Home Sales
Historical Housing Starts
On the basis of mortgage rate resets and a consumer led recession I mentioned a possible bottom in the 2011-2012 timeframe.

See Housing - The Worst Is Yet To Come for more details.

Let's take a look at housing from another perspective: new home sales historic averages and housing from 1963 to present.

New Home Sales 1963 - Present

New home sales reached a cyclical high in 2004-2005 approximately 50-60% higher than previous peaks.This happened in spite of a slowdown in population growth and household formation as compared to the 1960-1980 timeframe.

From 1997-1998 and 2001-2002 to the recent peak, the average sales level was 1.1 million units, or 45-50% higher than the 40 year average. This translates to an average of 300,000-400,000 excess homes for nearly a decade, and arguably as many as 3-4 million excess homes.

Such excess inventory may require as many as 5-7 years at recessionary average sales to absorb this inventory. The following charts are from a friend who goes by the name "BC".

 

[Riick]

New construction DOWN.
How many thousand (100-thousand?) construction workers laid-off?

Stats from FED show gain in Construction Workers --> Reality shows lots of Illegals w/o construction work.

How many workers will be laid off from Building Suppliers & Manufacturers for: Lumber / Pipe / Roofing / Siding / Paint / Flooring / Appliances?

And how many laid off from Financial Services firms such as CW, Indy, WAMU, etc., etc. How many MBrokers have already left the business? -- RE Brokers too.

Can this lead to anything but a recession, possibly with a Capital "R"??
The handwriting is already on the wall. Read It.

 

[murray stroupe]

Re

I really cannot say that Buffett saw this coming. All his previous pronouncements were subprime mortgages would have a minimal impact on the economy and the markets.

So much for the sage from Ohmaha. :new_all_coholic:

==================
And he may be right the first time;
certainly it hasnt had much more than 1 day wonder shocks to DOW S&P,NasdaQQQ.......

One man's opinions, as you implied, Randolf;
isn't much compared to markets, even a big man,LOL.

Do like his old fashioned statements, like;
debt is the weakest link in the business chain..............

 

[Couch Potato]

Can this lead to anything but a recession, possibly with a Capital "R"??
The handwriting is already on the wall. Read It.

Yes, it can lead to one spelled with a capital "D.":new_all_coholic: