LiveOakVA

Barron's: The Subprime Crisis May Be Over [Housing Tracker]

“1) Conservatively, the financial community has, in response to prospective subprime losses, written off, written down, and lost market value to the tune of some $350 billion. 2) If all $1.2 trillion of outstanding subprime debt were to go bad, of course, these write-offs, etc., would be inadequate. Since some two-thirds of subprime borrowers, even at this late date, are still current on their obligations, such a severe outcome is, however, hardly likely. 3) A more reasonable expectation, then, if still a pessimistic one, is a default on the one third of the subprime mortgages that are either already in foreclosure or are significantly late on their payments, about $340B in all.” (Barron’s, May 27th)

That's all very interesting except that the market in SoCal (admittedly one of the worst) is finding the subprime foreclosure rate for those delinquent or in default to be upwards of 60% rather than the 30% mentioned above. Perhaps it all washes out in the national numbers, but I'm inclined to think not. The financial wizards on wall street didn't see this coming and it appears they aren't capable of analyzing it now that it's going!

Housing Market Shows No Signs of Life

Reviewing the sales histories of some inside-the-beltway properties, of course one finds the spectacular price inflation during the bubble. From 2000 until 2006, total increases of 150% - 200% were common.

For homes currently listed we're now seeing price reductions up to 30% off the peak. 40% off the peak for the growing number of foreclosures is common.

But looking further into the sales history, one often finds another hint as to what we might expect for the near future. During the late 80's until the 90's prices were quite flat in many neighborhoods.

Are you ready to "shelter in place" for the next 10 years...?