To the less market experienced, subprime = the sky is falling. To those that have been around for a little longer, it's just another story that a resilient market will once again absorb. To tell you the truth my skin is a thick as bull leather these days. Now having lived through an energy crisis, a true housing market problem (live through 18% mortgage rates and then try to cry to me about subprime), severe market corrections, now 2 Gulf Wars (having had many friends and family serve in both now), an equities bubble popping of epic proportions followed by a terrorist strike not seen since the last WORLD WAR, only to top all that off with one of America's largest/oldest port cities being destroyed by an epic hurricane...... No, I can't get my panties in a wad over a bunch of greedy fucks lending to another group of stupid idiots that gladly have overextended themselves to live WAY ABOVE THEIR MEANS. The beat goes on and yes this expansion is still global and yes a market based economy will eventually get things priced correctly and slay those that haven't managed risk accordingly. So how are you going to make money on it today? Good Luck!
Oh yeah forgot, throw into the mix a savings and loan bail out through the government. Like I said, can't give any of these dorm. room daytrader tards. with 10 share lots on the line any credence. P.S. There are individual companies announcing buy-back programs the size of the subprime blow-up estimates. Perspective gentlemen, perspective. Good Luck!
How will low interest rates help if borrowers can't refinance loans that are are higher rates after resetting on homes that are worth less than they paid?
The last piece of property I sold I talked to the appraiser that has been doing real estate since the 70's when "condos" were first invented. Pretty reliable source of info. in my opinion. He recalled the very late 70's and early 80's when people that were selling their houses actually had to bring money to the closing for the sale to take place (yes, upside-down it's called). You see all these exotic mortgages didn't exist back then like now. So the answer to your question is that the house will be lost and the banker will now become a real estate owner. The home occupant will lose their 1% (in some instances even less) downpayment and go back to renting with a black mark on their credit. Oh yeah, they will also report back to the cubicle on Monday like all good lemmings do since they haven't lost their jobs along with the house. As long as employment and profits exist, this market will continue to do as it has. The lenders and those that had this risk distributed to them will have to answer, but the companies that are still fueling the China boom will continue to produce whether or not their employees own their houses or not. So what is your point?
welcome to the world of reverse leveraging in a market going downwards. you wait till october when an estimated $500 billion ARM'S are going to reset 200 basis points higher. that will be fun.
What has been the single biggest driver of the economy for the past few years? You're acting as though the homeowner who loses his house, the lender who lent the money that is being defaulted on, the buyer of the MBS and CDOs, and the consumer are all separate entities. They're all connected.
Sure makes for nice cover for the fed to sit on the sidelines. Tuesdays selloff seems to be a distant memory.
The real driver for the economy for the past several years has been global expansion that has been fueled through cheap money and lots of liquidity. The real estate excess is a result of all these things not a driver of them. You just answered your own question. The buyers of these houses assumed very little risk while the lenders assumed proportionately more through their greed and lax lending procedures. In turn they then turned around and shed some of the risk load into the larger credit markets where more players shared that risk. The people that speculated in real estate, overextended themselves and took on too much risk are going to get burned. You act as if there hasn't been anyone that profited off of real estate in the last ten years. To prove my point, how many people do you know personally that have lost their house? I personally don't know of one person that has lost their house in the past 5 years? Good Luck!
Most of the risk is in pension funds, on Wall St., and in other places that haven't been exposed yet. I think anyone who has had any bearish opinion on this whole RE fallout has been holding their breath for the ARM resets to really start before speaking about how bad it will or won't get. The real driver has been global expansion? How did that trickle into the US consumer's pocket? People have been refinancing houses for free money. How do you assume that consumers have been supplementing income to be able to afford all the consumer items that Americans love? Global expansion might help people to afford housing, but how do they afford new cars, expensive clothes, etc.? What do you think will happen when people who use their credit cards to rack up debt via purchases have their mortgage reset? Do you think they'll just magically pull more money out of nowhere to afford a higher mortgage payment on top of their credit debts? And to answer your question about people losing their houses...I don't know anyone who has lost their house because I don't live amongst the poor. You seem to be looking in the rear-view and assuming no problem has happened without looking ahead at the problems that have yet to break and the loan resets that have yet to occur. ALT-A loans are a much bigger deal than subprime ever was from what I've read and we haven't even seen the start of resets.