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Thread: Housing in U.S. Poised to Worsen, Derivatives Show

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    Default Housing in U.S. Poised to Worsen, Derivatives Show

    Housing in U.S. Poised to Worsen, Derivatives Show
    October 23, 2006 (Darrell Hassler and Hamish Risk - Bloomberg)

    The slumping U.S. housing market is about to get a lot worse, according to traders of mortgage-backed securities and the so-called derivatives on which they are based.

    The ABX index, which measures the risk of owning bonds backed by home-loans to people with poor credit, rose 30 percent since Aug. 9 to the highest since January. There are more than $500 billion of such notes outstanding.

    The increase in the index shows traders expect mortgage delinquencies and foreclosures to increase at a time when the number of homes for sale as measured by the National Association of Realtors is at a 13-year high. The percentage of home-loan payments more than 60 days delinquent rose to 7.23 percent in July from 5.9 percent a year earlier, the fastest rate of increase since 1998, Moody's Investors Service said Oct. 17.

    AntiSpin: Or you can ask the realtors what they think. For a mere $3,500 you can buy, "...a recent detailed study of 379 US metropolitan markets by a well-regarded Pennsylvania consulting firm, Moody's Economy.com, [that] says that while home prices are falling nationally, the worst may be over for Boston area homeowners. Prices may not rise any time soon, the study said, but they are probably not going to fall much further."

    Sometimes I think I ought to start a new site called heydumbass.com. Except DOTSTER, INC. owns the domain and I'm not going to pay the guy a cent for it. Identifying stock, housing, or other market bubbles is about as hard as finding a banker after you've missed your mortgage payments for six months. You can not see them if you don't want to, but only for so long. The path of their collapse–whether stocks or houses–is as mysterious as a hangover after beer, wine, scotch, and gin. Even the timing of the end of stock and housing bubbles isn't so hard to estimate. What is truly hard to estimate is the willingness of market participants to believe the pitches of bubble product sales people who are as compelled to tell the truth as politicians running for office are to make promises they can keep. The duration and extent of denial is nearly impossible for even the cruelest imagination to conceive.
    Last edited by FRED; 10-24-06 at 09:15 AM.

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