$6 TRILLION in Homeowner Wealth to Vanish – If We Are Lucky

Posted on May 1st, 2008 in Daily Mortgage/Housing News - The Real Story

Although the words ‘Washington’ and ‘think-tank’ never should be used the same sentence, this is quite startling.  Before you say ‘they did not lose anything because they never had it anyway’, that is not totally accurate. ‘Homeowner net-worth’ is touted by stock market pumpers all the time when holding onto the new found hope that the consumer will lead the economy out of its ‘shallow recession’ into throbbing and surging growth-mode in the second half of the year.

In addition, many people spent the ‘equity’ already. Remember those $1.3 TRILLION in home equity lines and loans spread around a small number of large banks (BAC, WFC, JPM, C, WM, NCC, GMAC, CFC, IMB) that they refuse to acknowledge as anything less than ‘prime’ paper worth at or close to 100 cents on the dollar?

This $6 trillion looks more realistic than anything else I have read. I can’t remember where I saw it, but recently it was reported that if US home prices fall 20% on average, over $7 Trillion is taken away.

So, this is what a ‘shallow recession’ looks like, huh CNBC? Two questions 1) what if this figure is light? I ask this because 100% of all the previous forecasts of this crisis since day-1, which was really at the end of 2006/beginning of 2007 when subprime lenders Own-it and New Century bellied-up, were totally off-base.  2) What will occur beginning int he 2nd half (30-days away), that will rejuvenate the consumer and make such a 2nd half resurgence? The $600 tax payers are being given?

Even if $6 Trillion is accurate and this ends up being a ‘shallow recession’, I sure would hate to see what a ‘deep’ one would do to homeowner wealth. -Best, Mr Mortgage

“The annual rate of price decline over the last quarter was 24.9% in the 20-city index and 25.8% in the 10-city index,” the center said in its Housing Market Monitor today. “At this rate of price decline, the excesses of the housing bubble will have largely disappeared by the end of the year. At the same time, the price decline implies an incredibly rapid loss of wealth. In real terms, the rate of price decline in the 20-city index would imply a loss of almost $6 trillion in real housing wealth over the course of the year, an average of $85,000 per homeowner.”


11 Responses to “$6 TRILLION in Homeowner Wealth to Vanish – If We Are Lucky”

  1. […] The Suns Financial Diary | A Personal Finance Blog on Saving and Investing wrote an interesting post today on $6 TRILLION in Homeowner Wealth to Vanish – If We Are LuckyHere’s a quick excerpt‘Homeowner net-worth’ is touted by stock market pumpers all the time when holding onto the new found hope that the consumer will lead the… […]

  2. That estimate is light – mine is $10 trillion.

  3. […] $6 TRILLION in Homeowner Wealth to Vanish – If We Are Lucky Remember those $1.3 TRILLION in home equity lines and loans spread around a small number of large banks (BAC, WFC, JPM, C, WM, NCC, GMAC, CFC… […]

  4. Lies,lies and yet more lies,no not from you Mr Mortgage but the banks,brokerage houses,the main stream media and of course our clever Ivy League/oxbridge educated politicians.Here in the UK and Europe,particularly the UK,our senior central banker has stooped to hide the real problems stemming from America and British mortgage,by using draconian legislation.Such is life in old Blighty and Europe.
    Yet David Einhorn warns of collusion within the SEC,the monolines and big banks;he is awaiting a subpoena from the regulators.Gary North screams INFLATION,yet seem like a voice in the wilderness.Yet these voices carrying the truth are villified and mocked in the media and ignored by those who should know better.In a democracy GOOD law should prevail and law passed shoul be adhered to by ALL,yes even the elite.If as in this financial crisis law is not adhered to,yes even by lawyers and accountants,then this is indeed a potent symbol of the endgame of what was once democracy.
    Keep shouting in the wilderness some do listen.

  5. I love to see the denial in the comments on the article. Its just phantom wealth. Like they didn’t refinance or have Heloc’s on their houses.

  6. Question,

    Lets say you bought a house somewhere in CA in 2002 that cost you say $300,000. You bought it with fully documented conventional financing. The house escalated in value to $800,000 in 2006. You stayed put and celebrated your new found wealth.

    House hase since devalued down to $400,000.


  7. Let them have their little rally. They’ll sucker some more folks that haven’t done their homework to dump what little cash they have left back into the Dow or a house, then watch it instantly disappear when the next shoe drops. It’s what they deserve for not doing their homework.

    Mr. Mortgage, your insight is invaluable. You articulate what we all suspected was going on. Watching the news outlets talk about “an end of gloom” is not only cringingly asinine, but a mischaracterization of what’s happening. As somebody recently said, “pointing out a hole in the boat is not the same as forsaking the boat itself.”

    I can’t wait to watch the collective shock when the next round of real news hits.

  8. They will suck mostly the foreign investors. I saw the same pattern during the internet bubble and the real estate bubble. It would be nice to cover frome time to time the foreign markets. Spain, Ireland and Britain look a lot like the USA. People don’t even get it. It’s far worse than 6 trillion. Most of the markets in Europe, as far away places like Bulgaria or Ukraine, are in bubble state too.

  9. Oil at almost 125$ and who knows ? at 150$. Iran is promissing to the USA a 200$. Oil price will hasten the downfall and accelerate the losses. It’s really funny to see banks only recogninizing a puny 366 billion. What a bunch of crooks! Who in the hell are they kidding ?

    What a bunch of hypocrits. Anyways nobody now believes their phony-baloney numbers. Make believe banking. Banks have a lot in common with the White House and Bush/Clinton.Have they found the arms of mass destruction in Irak yet ? I wonder how the whole system is still holding in one piece? Massive losses, bankruptcies and dilutions are coming. AIG after losing 8 billion, has warned that additional losses are very probable. Wow! That is a great argument for buying 12,5 billion of new stock !

  10. New estimate. 10 trillion.


  11. […] $6 Trillion in Homeowner Wealth to Vanish…If we are lucky! […]

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