Mark Zandi, the chief economist for Moody's Economy.com, wrote a good synopsis in an editorial today of the potential broader implications of the problems in housing and mortgages. Here are some excerpts:
Some 2.5 million homeowners -- 5 percent of all mortgage holders -- are expected to default on their mortgage loans this year and next. This is a record percentage that will mean a whopping $400 billion worth of defaults and $100 billion in losses to investors in mortgage securities. The fallout will hit nearly all of us.
First, home values will sink. Loans will be tougher to get, meaning fewer families will qualify for mortgages. Foreclosure sales will put more properties on the market at steep discounts. Less housing demand and more supply add up to lower prices.
Homeowners will find it more difficult to tap the equity in their homes for cash via home-equity loans or cash-out refinancing. Such lending is already fading quickly.
On the other side of the coin are investors who chose the riskier flavors of the new mortgage securities and now face big losses. If that sounds like someone else's problem, think again. Lots of pension plans that manage the savings of millions of ordinary workers and retirees have invested in hedge funds in recent years. Many of those funds are exposed to the mortgage market.
. . .
Finally, policy makers should prepare for the possibility that the fallout will undermine the stability of the global financial system and thus the broader economy.
10 comments:
wow. we'll more people will discussing this now. I guess thats a good thing.
Better to be prepared for a recession.
Stealth4 said...
"wow. we'll more people will discussing this now."
Sometimes it's what's not said that counts the most. David J. from the Bubble Meter blog has "thrown in the towel". He's moved on ... getting ready to settle down and (I'd assume) realizing that sometimes it's not the investment potential that drives a "buy or don't buy" decision but rather a "I need a home" decision. I wish him well in his up coming nupitals. I just wish he'd be frank with the Bubble Heads that look to him for advice and admit he was really really wrong about there being a bubble. He's move on ...he needs to let them move on. THAT is a lot fairer than just walking away from the train crash you've just helped cause.
And just to be clear ... By train crash I mean those individuals who have put their lives on hold for 2 or more years based on "180 degree WRONG" predictions and advice given by David J. Lost opportunities and time ..... All because the greedy cheerleaders convinced them they could really get "something for nothing". I'm not saying David J cheerleaded with bad intentions. He really believed it. But now that he himself knows better, he should admit such to his sheeple.
Man, I can't believe Lance got so eager for an argument that he decided to come over here.
Over a year of inventory in Prince William County and there's no bubble? Yeah. Right. The only reason my friend sold their place last year was by pricing it 20,000 below comparable properties and there were a LOT of them. I wouldn't be surprised if most of them were still on the market. I think the only people still in the market now are people who were already in the market and people who want to start a family. First time buyers and flippers? None that I know of.
lance,
It is becoming increasingly clear that you are just a Realtor shill and you lied that you are just an average homeowner. The Bubblemeter guy was hardly a cheerleader--he was a busy guy who did blogging on the side. Ben's housing bubble blog--a near full time venture for him--is thriving and the predictions made there 3 years back are becoming true day by day.
So we should thank you, Mr. Realtor, for showing us that we should be even more wary of realtors than we thought. Frank Llosa and a few others are the exception.
tedk,
how funny! when you don't like what you hear, you try to dismiss it by trying to say the messenger is biased.
sorry, but I am just a homeowner ... and I am a homeowner because I am smart enough to accept things as they are and not just sit around hoping they will change as you are doing. I am pro-active, you are re-active. Tell me who stands a better chance in the game of life?
as for your paranoia ... do you really believe real estate "shills" would bother with this or any blog?
lance,
How funny that you should be cheering the bubble on a day when even Angelo Mozzilo of Countrywide is saying any recovery will be no earlier than 2009. The news is not getting any better for you, perma bulls.
Why don't you flat-earthers find something better to do?
I don't like to get into a shouting match with you. Good Bye.
What happened to David Jackson? Has he given up on his predictions of doom and gloom and bought a house?
Um, David Jackson won and went home.
Oh, and my homebuilder puts are up 50%. Scoreboard.
Post a Comment