Not Halfway Through the Crisis Yet
Chuck Ponzi October 9th, 2007
In a CNN Money piece, S&P’s Chief Economist tells us that the subprime problem is not yet done:
The panic has subsided but the housing market has not hit bottom yet. It will not hit bottom until winter. Housing prices won’t hit bottom until next summer and the losses won’t peak for another two years, until 2009,” said David Wyss at a press briefing in Mumbai. “We are not halfway through this crisis yet.
Of course, these are the same people that never saw the problem coming. How they can see where we are in the tunnel after just realizing we are there is perhaps a little suspect.
Most should at least factor in the high likelihood that they are optimistic about the timing of the recovery to begin in 2 years. However, that is human nature… it is not until the crisis hits maximum pain that we begin to deal with the reality of the problem. Soon after that, we can become irrationally pessimistic. We are for sure not even close, no matter how you look at it.
Are you familiar with the Brightwater development in the Bolsa Chica area out there? Do you think that will be impacted as well by the housing slowdown?
I think it will. I work in construction, and from last winter, compared to this winter, it is extremely slow.
What happens next? The major damage is probably already done, and the present situation will likely settle out over the coming year. Lenders will stop pulling products off the shelf, and the rates on products that have moved so significantly higher now should trend lower down the road as delinquency rates stabilize.
http://www.contactherrick.com
Roger,
I don’t agree with the assessment that rates will go down. We are still at very tight yield spreads over risk-free investments. In addition, accelerating inflation seems to be the discussion du jour. As the FED knows, it’s not inflation they need to manage as much as inflation EXPECTATIONS. If they don’t the bond market won’t let them off the hook.
Even Fannie’s Mudd said we won’t be through the current credit environment until 2009 at the earliest, and that we are still going to get worse.
Of course, no market goes straight down, so there may be some decent entry points for people looking to lock in a low fixed rate where they currently are. Even that, I can agree on. Still, they shouldn’t wait long for refinancing, but buying is a different story.
Chuck Ponzi
The rates for the products that have gone up the most for example jumbo A paper loans will begin to settle and lower after their recent spike. There is a large rate disparity between conventional and jumbo A paper loans right now and I would expect that margin to be reduced in the future 3-6 months maybe longer. My website gives a daily report and recommendations on specifically mortgage rates. Very helpful.
http://www.contactherrick.com
The crisis is not over, it’s beginning now. Read public announcement of Global Europe Anticipation Bulletin to know the truth on the crisis magnitude.
http://www.leap2020.eu/Content.....s_r34.html
Chuck:
My Ziprealty agent sent me Gary Watts latest “forecast”.
Are you interested in parsing it for the blog? If so, email me and I will send it.
I personally don’t have the stomach for it.
Gary Watts will still burn in HELL.
Of course we want the laughs, post it SBG!
Yes, please.
socalb@gmail.com
My zip Agent doesn’t contact me. Things are going too well for him. Too many leads to follow up.
Chuck
I sent it about mid-day on Saturday.
Oh well, Lansner linked to it today on his blog.
Big Paid Media at least is starting to pay attention.
Whoo, that is some funny shit.
Did you notice “Goldman Saks”.
I got a good laugh out of that one.
As soon as I finish reading/laughing, I’ll post a response.
BTW, there’s nothing he can do to stop the bleeding now. OC housing is circling the crapper now.
Chuck
I agree and thought it would fit with the Gary Watts will burn in hell series.
POst it SBG