NO BOTTOM in sight!! Bad NEWS!! 12 posts by 5 users

Posted: 07/24/2008 at 05:39PM

By: PAUL JACKSON
July 23, 2008

in part:

" The strain of increased debt and falling home prices is pushing the U.S. economy to a breaking point, setting up consumers and investors for a nasty fall later this year, according to new research published Wednesday by Moody’s Economy.com."

“Household credit quality is rapidly eroding, and overleveraged households are at the heart of the economy’s problems,” said Mark Zandi, chief economist for Moody’s Economy.com. “The mounting losses on household debt are straining financial institutions and will keep the economy struggling to grow for the remainder of this year and well into 2009.”

" While some are projecting a quick turnaround out of the current doldrums, Moody’s is clearly not nearly as sanguine on the prospects for either housing or the economy. The company said it expects household credit conditions to continue weakening through much of the remainder of the decade, with another 5 million homeowners at significant risk of default during this period — a total that includes about one-half of the current 10.5 million borrowers with subprime, Alt-A or jumbo option ARM mortgages that are in significant negative equity positions.

In other words: strap yourself in. It could be a very long ride.

http://www.housingwire.com/2008/07/23/moodys-warns-on-weakening-credit-quality/

Posted: 07/24/2008 at 08:55PM

Don't get me started! LOL

Were into this mess for a few years at minimum. The majority of Alt-A re sets are late 2010, which starts a whole new phase of foreclosures well into 2011 and beyond.

Alt-A is a much bigger animal than sub prime!

Let me ask you this... How does a BROKE government even consider a long term bail out plan?

History is in the making here and NOT for the good. All of the major analysts are saying, " buckle up and hold on tight" were in for a long ride.

Posted: 07/24/2008 at 09:55PM

Not sure if this decade ends at the end of 2009 or 2010, but I think either of those are optimistic. I know this graph's been posted before, but have another look. Resets don't stop until then end of 2011. Then, we have to wait for those foreclosures to perk through the system to, most likely, turn into REOs. Then, they have to eventually be bought. I drove through my farm area again today for the first time in about three weeks, and REOs that were overpriced in January are still setting now. Only difference is the weeds are higher and they have fewer windows. If we get a little more protection like San Diego's proposed " foreclosure sanctuary" (i.e., " no more loans" ), we'll still be working off the backlog in 2013 or 2014.

Posted: 07/25/2008 at 06:22AM

Not sure if this decade ends at the end of 2009 or 2010, but I think either of those are optimistic. I know this graph's been posted before, but have another look. Resets don't stop until then end of 2011

Dumb me! I was thinking DECADE, like DECADE! Not the end of 2010.

Thanks for posting that graph again, I was looking for that.

Those option Arm's are expected to be a killer as well.

Posted: 07/25/2008 at 06:49AM

Simple. It'll swing back. Not all the way - but quite a bit. Probably back to about 80% of the " old value" .

Posted: 07/25/2008 at 07:33AM

That was my thought, too.

As far as long-term values, I'd again go back to the Case-Shiller data. Eventually, prices will move to some inflation adjusted value. It may well be that if you take the pre-2000 value trend and extrapolate it into the future, continuing to adjust for inflation, you'll arrive at the new long term trend. When prices eventually match up with that, either by going down in value or by inflation catching up, we'll start seeing appreciation, at the inflation rate.

I think that assumes lending guidelines in the future are similar to what they were like in the 80's and 90's. If they're much tighter, the new trendline will be lower. If they end up being looser (which is what drove this bubble anyway), the new trend line coudl be higher.