Mortgage market in collapse

Discussion in 'Economics' started by silk, Mar 5, 2007.

  1. silk


    The mortgage bubble is now in complete collapse. Scarry part is the foreclosures havn't even hit the market yet. This will start in ernest over the next 3-6 months. Banks will put homes on market at whatever the loan balance is with little concern over what the neighbors stale listings are listed at. This will cause home prices to fall to the next level in a dramatic way. Economy will quickly be in recession and the current subprime headlines will be nothing compared to what is about to hit the ALT A and conventional markets. Problem there will actually be worse as the loan-to-values are often much higher than sub-prime.

    The Great Depression II is starting. Little can stop it and no amount of fed cuts can reduce the coming increase in risk premiums. Fed will have to lower 200 basis points just to offset the risk premium increases on subprime mortgages.
  2. MattF


    I wouldn't go as far as GD II, because that's saying an awful lot.

    Considering that what's happened over the past week and change, and many predictions on other areas aren't looking too good, I say if this keep up for a few more months overall, and at least looks sluggish or continues down that a recession of some caliber would be on the horizon. The spring season is where housing gets kicked into high gear, so we're just about ready to hit that; 3 months of poor sales and a glut of foreclosures on the market and look won't see a price rebound at that point until well into next year.

    Besides, Bush and the like helped screw things up enough as is...although not responsible "directly" for this, a nationwide recession on his way out of office would be the ultimate topper...ironically...

    By the same token, I'm keeping an eye on foreclosures in my area (MA/CT) where housing is pretty damn high-priced to begin with. Some areas have shot up pretty high so far in foreclosures (whether listed or in the process), others are increasing more slowly...and since I love buying something at a nice discount, one wouldn't be out of the question eventually...

    Of course, market mileages can and always vary overall....
  3. silk


    CFC to stop offering zero down payment mortgages as of today.

    Not many people can afford to put 5% down on a $400,000 house that was $250,000 6 years ago.

    It was the ability to put no money down that helped push the $250k houses up to $400k. Now there will be few buyers. Houses will fall back to $340k and all of last year's no money down mortgages will be upside down.
  4. Silk,

    I understand where you are coming from.

    If the market really headed for a real bust, and pushes us into an recession, people can't even keep their jobs, let alone keeping up their mortgages. Then it will need fuel to the fire, and the housing market would went to hell (ask anyone in Hong Kong with an mortgage after 1997).

    I would say the key rightnow is, will the stock market hold up? If not, would our (the world) economy goes to hell?

    China will get hit hard, since in my mind internal consumption wouldn't be enough to fuel the GDP growth. Chinese just don't spend like American or European (borrow to spend). Also, when you look at the raw GDP figure, you are not seeing the complete picture. How much is the contribution from manufacturing exports? How much is from properties prices? How much is from government directed civil projects?

    Once it busts (the global stock markets), forget bond, forget the housing market, it's GD II. So, will it bust?
  5. Sooner or later.

    2007, 2008, 2009 ... later ... but when it does we'll know who the traders are and who the investors are - life will be very interesting.
  6. Actually, alot of people do still buy on fixed mortgages with x% down.

  7. Just think of those greedy so call "investors" who keep on average down or picking bottoms.

    Ever ask any of your friends why they buy and sell stocks? and more importantly what's their logic? When friends talk about stocks, I would ask, what's their logic being behind their certain purchases? All I get is certain stocks is on the move, or for saving and investing.

    I got to know a Mainland Chinese univesity graduate load her father's retirement funds on local Mutual Funds two weeks before the crash, for god sake she didn't even know what's a stop loss before she met me.

    Last Sunday after a large family dinner, I asked one of my uncle had he "stoploss" yet? He said no, his stocks are "Investments", then I told him not to average down and he gave me THE LOOK.

    People acturally think stocks rises forever. Greed will kill them all.
  8. Not only that, but many new homes were purchased by newlyweds past 3-4 years. Given statistic that >50% of couples end up in divorce, they'll have to sell that house at like 15% discount to get it sold quick or it gets reposessed.
  9. heheh.. are you a home owner? just curious. and where in the country do you live. am curious.
  10. It's getting ugly. As I have mentioned before my wife works in mortgage banking for one of the largest homebuilders. Their investors for 2nd loans are disappearing right and left in the last 2 weeks. There was talk about stopping some of their programs all together because the rates they would have to charge would be considered predatory. Freakin 20% on high risk loans. :eek:
    #10     Mar 11, 2007