Report: Subprime woes to drag housing in ’07

[RamboLiberal]

Source: MSNBC/AP

The subprime mortgage implosion will take even more steam out of the already slowing real estate market this year and beyond, according to a new economic report.

More than two dozen subprime lenders have shut down in recent months and others are scrambling to stay in business as a spike in defaults caused by borrowers unable to make payments has rocked the mortgage industry.

Now, as lenders tighten credit standards, the housing market will likely see further declines in price and output, senior economist David Shulman wrote in the quarterly Anderson Report to be released Monday by the University of California, Los Angeles.

“We suspect the problem in the subprime area is just the tip of the iceberg for the mortgage market as a whole,” Shulman wrote. “For all practical purposes, the subprime market is in the process of shutting down.”


Read more: http://www.msnbc.msn.com/id/17903104/

[Warpy]

1. A lot of speculators bought up housing using subprime loans

especially the interest only loans, thinking they could sell before the balloon payments started and make a tidy profit. Those people are now putting those houses on the market, houses that were overbuilt and have sat empty for a year or two. There is now a glut of housing combined with the collapse of shaky loan outfits who could have gotten them occupied by real families.

The real problem is the overbuilding in too many areas. The housing industry is going to be scrambling for work. With them are all the industries that supply home building and new home owners.

How far this is going to go is anybody's guess, but the main thing supporting this economy were housing inflation and easy credit.

[Captain Angry]

2. They almost had it.

The article says:

“For all practical purposes, the subprime market is in the process of shutting down.”


I think they meant:

“For all practical purposes, the entire housing market is in the process of shutting down.”


We have several years of adjustable mortgages to reset. People won't buy in droves until the majority thinks we've hit bottom. I don't think ANYBODY seriously thinks we're near the bottom. So the buyers who can wait will wait.

[ixion]

3. as long as they continue to ask 200k+ for a 150k house...

and 600k+ for a 300k house...

I would say we're not anywhere near the bottom yet.

[Captain Angry]

4. Exactly.

The prices will fall.

I know a lot of construction guys that are very nervous. Work dried up almost over night. They're moving to places that are booming for other reasons.

The problem is, that some people will not sell at the lower prices, they can't afford the loss.

I keep waiting for houses to start burning down. I guess one reason we haven't seen stories about it is that you can't get insurance for an empty house or building. As I understand it, if you try to buy fire insurance for an unoccupied building or home, it will be refused at any cost. Arsonists generally like to burn down empty places so nobody gets hurt, so the insurance companies won't sell insurance on the empty building.

But surely at some point we'll start seeing these places burn for the money.

[mountainvue]

5. Just received an email this morning.

Another sub prime lender, Southstar out of Atlanta, GA has closed the doors. They literally told loan officers who had loans in progress that they were sorry but they would fund no more loans effective today. And New Century filed Chpater 11 today.