Trying to Throw His Arms Around the Housing Crisis
Investment adviser John Lounsbury today tries to wrap his arms around the national housing crisis in a post on the investment blog Seeking Alpha. Here are three of his nine summary points: 1. It has been estimated that there will be 8.1 additional foreclosures by the end of 2012. This is 21% of all mortgages….
Investment adviser John Lounsbury today tries to wrap his arms around the national housing crisis in a post on the investment blog Seeking Alpha. Here are three of his nine summary points:
1. It has been estimated that there will be 8.1 additional foreclosures by the end of 2012. This is 21% of all mortgages.
2. It has been estimated that 19 million mortgagees will owe more than their house is worth by 2010. This is 50% of all mortgages.
3. It has been estimated that about 6.5 million mortgagees will not be able to afford their mortgage payments at some time during the term of the mortgage. This is 17% of all mortgages.
His conclusion? “Federal intervention to solve the housing crisis would consume too much resource that would be better used to stimulate future economic growth.”
Housing: Where Is the Bottom? [Seeking Alpha]
Graph from Credit Suisse
something that people really need?
How about a device that makes all your old printers, cameras, and hand helds compatible with Windows vista 64-bit?
Good one, dittoburg.
The only way out of this mess is to produce something that people really need and buy. The reason the economy grew so much after WWII was that Europe needed to rebuild and we produced the steel and whatnot they needed.
Right now, the US is just a bunch of consumers eating dinner out and buying drapes on credit cards.
“What you all fail to realize, especially the doomsayers, is that as long as the economy remains weak (which is what most of you are projecting), then interest rates will remain low and a lot of these loans will fix at some decent, historically low 30 year rate that these people can afford.”
True and False.
According to the article, many of these resetting mortgages have paid zero interest and/or have not made any payments toward principal.
When you reset, you have to (1) start paying interest and (2) start paying off the principal. Although a homeowner might reset to a possibly decent interest rate, payments will still skyrocket because principal will have to be paid off.
It’s all in the article. They actually said that if the economy improves, then it could be a better outlook.
dave, I think you comment is only true for those who have equity in their home. Those with homes worth less than what they owe will not get low interest rate loans. They are probably doomed.
“but it is still incomprehensible,
what is the deep yellow “Alt -A”?
what is the grey “Agency”?
is there a key somewhere I’m missing?”
I don’t know exactly what Alt-A and Agency are, but they look like types of mortgages. I think mortgages are divided up based on risk and who issued them. Alt-A I think is risky. Agency is Government Agency I think. But that’s not as important as the volume.
Take 2 years. 2011 and 2015.
Look at the yellow labeled Optional Adjustable Rate.
In 2011, the graph shows that each month about $30 Billion US of Optional Adjustable Rate mortgages (which are a type of ballooning ARM, I think) will reset to a higher interest rate.
In 2015, it’s about $5 Billion US per month.
I’m not an economist, but it looks like in 2011, lots of people will be facing new higher mortgage payments. In 2015, mortgage payments will be more stable.
The author is arguing that although subprime tapers off, lots of non-subprime borrowers will also reset, and that will hurt housing.
8.1 additional foreclosures by the end of 2012? Well thats no so bad.
What you all fail to realize, especially the doomsayers, is that as long as the economy remains weak (which is what most of you are projecting), then interest rates will remain low and a lot of these loans will fix at some decent, historically low 30 year rate that these people can afford.
Actually IronBalls, the hard evidence shows that Bear Stearns, Citigroup, AIG, and Bank of America are the least prudent borrowers and spenders out there.
Still, based on the last eight years I think your skepticism of government is partly warranted. The worst president in American history has certainly done a lot of harm to this great nation. Thankfully the days of America electing the most tolerable fundamentalist are over.