Big Al45

Financials and Housing: The Outlook Remains Ugly

This writer of this article seems to forget that all real estate is local. His conclusions regarding Alt A defaults is probably on point for banks that have a high exposure to mortgage loans made in Southern and Central California, Nevada, Florida, Michigan, Ohio, and the Atlanta metroplex.

But, there are a lot of other areas in the US where housing prices did not rise much during the housing bubble and prices in those areas probably will not fall more than 15% peak to trough. As long as the government bails out Fannie and Freddie (which seems certain), banks that don't have significant exposure to California, Florida, etc. should return to profitability by the end of 2009.

For the record, I do not own any bank stocks, and expect the market to retest and probably exceed the July lows. However, the level of pessimism in this article is excessive.