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Thursday, May 29, 2008

Housing/Subprime/Credit Roundup — May 29, 2008

Items of Interest:

Mortgage rates jump to 11-week high -- Rates on 30-year mortgages jumped this week to the highest level since mid-March as investors began to worry about what the Fed will do to combat growing inflation pressures....

Mortgage rates rise, topping 6% - CNN Money
Mortgage Rates Soar: Are More Foreclosures Ahead? - Realty Check, CNBC
Wall Street Journal:
You Don't Have to Be Rich to Own a Home on the Beach -- Miami, FL -- Yes, this state is on sale. But how cheaply can you get a weekend home?

After all, not everybody is in the market for a multimillion-dollar residence, or is ready to spend $1,000 a month on condo fees.

So what kind of deals are out there now for the rest of us?

The answer is that for less than $200,000 you can now get something pretty reasonable, on or near the water.

Whether you count that as value may depend on a lot of things. But these are prices not seen down here since well before the bubble.

For example, $150,000 might now get you a three-bedroom house in a distressed sale in Cape Coral, a town on the Gulf coast just north of Naples. "I've got one in a short (read distressed) sale," says local agent Joan Psarros at Re/Max. "It's 2,000 square feet, on a fresh water canal, and it has a pool. It's only a few years old – it was built in 2005." ...
Naked Capitalism:
NYC RGE Monitor Panel Discussion (Not for the Fainthearted) -- Housing is set to fall further. Case Shiller says prices have declined 14% so far. RGE thinks it's more like 20%. Unsold inventories are still increasing. Housing prices will continue to fall through at least 2009. RGE sees the bottom at a 30% fall, which equates to a $6.6 trillion loss of wealth. That's equal to 1/2 year of GDP>

With a 10% fall in housing prices, you have about 8 million mortgages underwater. At 20%, it goes to 16 million and at 30%, 21 million. That's 40% of the mortgages (roughly 51 million homes are mortgaged).

Then the question becomes what losses result. Assume a 20% fall in housings prices. Assume 50% loss severity (as in you get 50 cents on the dollar). The question is how many walk away, If you assume as Roubini does, that 50% will walk away (note most analysts assume more like 20-25%)), losses will be $1 trillion. But the equity of US banks is only $1.3 trillion. Admittedly, not all the losses will hit banks, since a lot of the paper was sold to institutional investors and overseas, but even if you get only 25% walking away, that's losses of $500 billion.

Calculated Risk

MishTalk - Mike Shedlock

Paul Krugman - NY Times

The Big Picture - Barry Ritholtz

naked capitalism - Yves Smith

Pragmatic Capitalism

Washington's Blog

Safe Haven

Paper Economy

The Daily Reckoning - Australia