Monday, April 25, 2005

Admitting Bubble "Not An Option"

The DallasNews editorial by Danielle DiMartino has this headline, "High stakes won't allow us to admit housing bubble." Here are some quotes.

"The powers that be insist there's no housing bubble. They have to, mass delinquencies and foreclosures are simply not an option, not with the risks built into the mortgage-finance system. The general concern about these instruments is that they've yet to be 'tested' by an inevitable market downturn. Is there risk in today's lax lending standards?"

"John Vogel (said that) when the government first noted the risks in the savings and loan industry, he remembered, a pencil-to-paper exercise put the risk at about $40 billion. 'We knew we had a problem back when the S&Ls were on the skids in the early '80s. Instead of taking care of it then, we waited until we had a $500 billion problem.'"

"Ten years ago, when the whole securitized mortgage market was $1.6 trillion, Fannie and Freddie held about $76 billion on their balance sheets, or less than 5 percent. Today, Fannie and Freddie either own or back about $3.5 trillion of a $5.5 trillion market."

"Eating away at these protections are no-income verifications, piggyback loans made only to skirt the mortgage insurance requirement, builders paying closing costs so buyers cross the threshold owing more than the house is worth, and lenders doing everything they can to avoid foreclosing."


At 10:30 AM, Anonymous Anonymous said...

Someone finally admitted what we on this board have been discussing for a month now. WOW.

So there it is. Vacancies at 10%, record house purchases at record prices and the system is ready to collapse. Now it is just a matter of when.

My advice to homeowners, especially highly leveraged ones is to SELL, regardless of how much grief your wife and son give you about the move. ANYTHING will be better than owning real estate with a mortgage when this all shakes out.

At 10:46 AM, Anonymous Anonymous said...


Nothing about existing home sales? it was just released... in 3 of 4 regions, sales were flat... any word?

At 11:00 AM, Blogger Ben Jones said...

I put the existing home sales link in an earlier post. It's been busy this AM.

At 1:47 PM, Anonymous Anonymous said...

no bubble yet:


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