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.”