MARK JOLLIFF
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My over/ under on this thread was 4500. I guess if I'm gonna lose I might as well be 4501!! Yippeeeeeee!
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Housing Bubble Bursting?
- Thread starter Austin
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Randolph Kinney
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Homeownship rate falls, vacancies of houses rise
U.S. Homeownership Rate Falls Again, Longest Streak of Declines Since 1981
The excerpts from a article is Bloomberg states that the percentage of people owning homes has declined from a high of 69.3% in 2004 to 68.1% in Q3 2007. The percentage of people owning homes 10 years ago was about 64%. This is also the longest decline since 1981. The article also contains additional comments about the housing market, none of which is rosy.
A September study by the Fed Bank of Atlanta found that as much as 70 percent of the increase in the aggregate homeownership rate over the decade was due to the introduction of new mortgage products, including second mortgages. Demographics, including the rapidly growing immigrant population, accounted for up to 31 percent of the increase, said the study.
The Census Bureau report also found that a record 17.9 million U.S. homes stood empty in the third quarter as lenders took possession of a growing number of properties in foreclosure. The figure is a 7.8 percent gain from a year ago, when 16.6 million properties were vacant, the Census Bureau said. About 2.07 million empty homes were for sale, compared with 1.94 million a year earlier, the report said.
U.S. Homeownership Rate Falls Again, Longest Streak of Declines Since 1981
The excerpts from a article is Bloomberg states that the percentage of people owning homes has declined from a high of 69.3% in 2004 to 68.1% in Q3 2007. The percentage of people owning homes 10 years ago was about 64%. This is also the longest decline since 1981. The article also contains additional comments about the housing market, none of which is rosy.
A September study by the Fed Bank of Atlanta found that as much as 70 percent of the increase in the aggregate homeownership rate over the decade was due to the introduction of new mortgage products, including second mortgages. Demographics, including the rapidly growing immigrant population, accounted for up to 31 percent of the increase, said the study.
The Census Bureau report also found that a record 17.9 million U.S. homes stood empty in the third quarter as lenders took possession of a growing number of properties in foreclosure. The figure is a 7.8 percent gain from a year ago, when 16.6 million properties were vacant, the Census Bureau said. About 2.07 million empty homes were for sale, compared with 1.94 million a year earlier, the report said.
Riick
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You might want to have a look here for the CHART from Credit Suisse
on Mortgage Rate RESETS not only for sub-prime but Alt-A and Option ARMS
... going from 2007 to 2011...
CHART ALONE:
http://bp1.blogger.com/_nSTO-vZpSgc.../BNQzRl76buw/s1600-h/Mortgage-Rate-Resets.png
Discussion:
http://globaleconomicanalysis.blogspot.com/2007/10/housing-worst-is-yet-to-come.html
on Mortgage Rate RESETS not only for sub-prime but Alt-A and Option ARMS
... going from 2007 to 2011...
CHART ALONE:
http://bp1.blogger.com/_nSTO-vZpSgc.../BNQzRl76buw/s1600-h/Mortgage-Rate-Resets.png
Discussion:
http://globaleconomicanalysis.blogspot.com/2007/10/housing-worst-is-yet-to-come.html
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Randolph Kinney
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What is subprime paper worth today? CDOs? SIVs?
Goldman created 13 different tranches with ratings from Moody's and Standard and Poor's starting at AAA and going down to BB (and the last piece or the "equity" tranche is not rated. Six of those tranches have already been completely written off. The AA tranche is now considered junk. Look at the chart below which shows fast the losses started piling up from a start point just 18 months ago.
As a second-mortgage holder, GSAMP couldn't foreclose on deadbeats unless the first-mortgage holder also foreclosed. That's because to foreclose on a second mortgage, you have to repay the first mortgage in full, and there was no money set aside to do that. So if a borrower decided to keep on paying the first mortgage but not the second, the holder of the second would get bagged.
If the holder of the first mortgage foreclosed, there was likely to be little or nothing left for GSAMP, the second-mortgage holder. Indeed, the monthly reports issued by Deutsche Bank, the issue's trustee, indicate that GSAMP has recovered almost nothing on its foreclosed loans.
By February 2007, Moody's and S&P began downgrading the issue. Both agencies dropped the top-rated tranches all the way to BBB from their original AAA, depressing the securities' market price substantially.
In March, less than a year after the issue was sold, GSAMP began defaulting on its obligations. By the end of September, 18% of the loans had defaulted, according to Deutsche Bank.
Lacks underwriting has plagued mortgage backed paper with ALT-A and near prime loans suffering increasing defaults. It will be a long long time before investors will accept mortgage backed investments. The true losses are not known to date. Merrill Lynch, Bank of America, Citi, Countrywide and others have begun the process of writing down the value of paper connected to troubled mortgages. It is a bubble that has burst effecting investors, banks and the housing market.
Goldman created 13 different tranches with ratings from Moody's and Standard and Poor's starting at AAA and going down to BB (and the last piece or the "equity" tranche is not rated. Six of those tranches have already been completely written off. The AA tranche is now considered junk. Look at the chart below which shows fast the losses started piling up from a start point just 18 months ago.
As a second-mortgage holder, GSAMP couldn't foreclose on deadbeats unless the first-mortgage holder also foreclosed. That's because to foreclose on a second mortgage, you have to repay the first mortgage in full, and there was no money set aside to do that. So if a borrower decided to keep on paying the first mortgage but not the second, the holder of the second would get bagged.
If the holder of the first mortgage foreclosed, there was likely to be little or nothing left for GSAMP, the second-mortgage holder. Indeed, the monthly reports issued by Deutsche Bank, the issue's trustee, indicate that GSAMP has recovered almost nothing on its foreclosed loans.
By February 2007, Moody's and S&P began downgrading the issue. Both agencies dropped the top-rated tranches all the way to BBB from their original AAA, depressing the securities' market price substantially.
In March, less than a year after the issue was sold, GSAMP began defaulting on its obligations. By the end of September, 18% of the loans had defaulted, according to Deutsche Bank.
Lacks underwriting has plagued mortgage backed paper with ALT-A and near prime loans suffering increasing defaults. It will be a long long time before investors will accept mortgage backed investments. The true losses are not known to date. Merrill Lynch, Bank of America, Citi, Countrywide and others have begun the process of writing down the value of paper connected to troubled mortgages. It is a bubble that has burst effecting investors, banks and the housing market.
Jerry Dell
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Randolph,
Our current treasury secretary, Henry Paulson, is former CEO of Goldman Sachs. He divised the current SIV rescue plan. This stuff just continues.
Our current treasury secretary, Henry Paulson, is former CEO of Goldman Sachs. He divised the current SIV rescue plan. This stuff just continues.
Randolph Kinney
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Jerry,
I suspect that when the federal government gets involved with a bail out plan, it is because there is a huge problem threatening the banking system and solvency of Wall Street investment banks.
As long as you don't pay attention to that man behind the curtan, everything appears to be just fine.
I suspect that when the federal government gets involved with a bail out plan, it is because there is a huge problem threatening the banking system and solvency of Wall Street investment banks.
As long as you don't pay attention to that man behind the curtan, everything appears to be just fine.
Austin
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Randolph Kinney
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Case-Shiller 20 city index down 4.4%
Twenty-city Case-Shiller index tracking U.S. home prices down 4.4% in August
Twenty-city Case-Shiller index tracking U.S. home prices down 4.4% in August
With Austin's post about oil, gold, gas, and the dollar - it makes sense that home values are dropping like a rock.
Riick
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Doublethink
I'm ROTFL...except that it hurts - in the wallet.
And 98% of the people in the USA don't have a single clue what's going on.
I actually heard a segment on NPR about the BENEFITS of the dollar heading South. Anyone remember Orwell's 1984 ??
That segment was blandly presented - a wonderful example of "Doublethink"
http://en.wikipedia.org/wiki/Doublethink
..and of course, from the people who brought us Political Correctness. Who else?
--edit--
DOUBLETHINK:
"The power of holding two contradictory beliefs in one's mind simultaneously, and accepting both of them . . . . To tell deliberate lies while genuinely believing in them, to forget any fact that has become inconvenient, and then, when it becomes necessary again, to draw it back from oblivion for just so long as it is needed, to deny the existence of objective reality and all the while to take account of the reality which one denies — all this is indispensably necessary. Even in using the word doublethink it is necessary to exercise doublethink. For by using the word one admits that one is tampering with reality; by a fresh act of doublethink one erases this knowledge; and so on indefinitely, with the lie always one leap ahead of the truth." -- CITATION: Orwell, George (1949). Nineteen Eighty-Four. Martin Secker & Warburg Ltd, London
As long as you don't pay attention to that man behind the curtan, everything appears to be just fine.
I'm ROTFL...except that it hurts - in the wallet.
And 98% of the people in the USA don't have a single clue what's going on.
I actually heard a segment on NPR about the BENEFITS of the dollar heading South. Anyone remember Orwell's 1984 ??
That segment was blandly presented - a wonderful example of "Doublethink"
http://en.wikipedia.org/wiki/Doublethink
..and of course, from the people who brought us Political Correctness. Who else?
--edit--
DOUBLETHINK:
"The power of holding two contradictory beliefs in one's mind simultaneously, and accepting both of them . . . . To tell deliberate lies while genuinely believing in them, to forget any fact that has become inconvenient, and then, when it becomes necessary again, to draw it back from oblivion for just so long as it is needed, to deny the existence of objective reality and all the while to take account of the reality which one denies — all this is indispensably necessary. Even in using the word doublethink it is necessary to exercise doublethink. For by using the word one admits that one is tampering with reality; by a fresh act of doublethink one erases this knowledge; and so on indefinitely, with the lie always one leap ahead of the truth." -- CITATION: Orwell, George (1949). Nineteen Eighty-Four. Martin Secker & Warburg Ltd, London
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