Sunday, May 20, 2007

Bernanke on the Suprbime Meltdown

In a recent speech Ben Bernanke, chairman of the Federal Reserve, talked about the subprime mortgage meltdown.
All that said, given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system.
Ok. Nothing to see here, please move right along.


  1. He's trying to put the poloce tape up around it so no one gets a close look at the carnage.

  2. Fine with me... The best crashes always are a surprise. Keep up the "it's under wraps," Ben!


    I've been waiting two years for the implosion. When is it going to happen?

  4. Where is the crash? When is it coming? Any time soon?

  5. Now here's an article that Lance needs to read. I encourage David Jackson and anyone else who is interested to read it as well:

    Superstar cities may be investors' superstardust
    by Robert J. Shiller

  6. All is quiet.

  7. The bubble is bursting!

    New home prices fall by 11% !

    It seems none of the builders wants to be the carrying inventory into fall and winter.

    Now that the builders have begun to slash prices homeowners will have little choice but to follow suit.

    Things will work their way from the outside in in the DC area.

  8. And new home sales skyrocketed! pwn3d!

  9. "And new home sales skyrocketed! pwn3d!"

    And sales are still down 10% YoY!! d0ubl3 pwn3d!! Or whatever lamers like you say.

  10. Anon, I hope you are being sarcastic?
    New home sales fell by 10% YOY. Then were up from march to april this year, but new home sales always go up from march to april.
    The news should read.

    New home sales drop 10% YOY and median price drops 11%. OUCH.
    the real bob

  11. For those of you waiting for the implosion, welcome:

    From today's WSJ Online:

    Existing-Home Sales Fell in April
    As Subprime Lending Drops Off
    May 25, 2007 2:12 p.m.

    WASHINGTON -- Existing-home sales retreated in April to the slowest pace in nearly four years as subprime loan market troubles dog the housing sector.

    Home resales fell to a 5.99 million annual rate, a 2.6% decrease from a 6.15-million pace in March, the National Association of Realtors said Friday.

    The drop in demand rained on brighter news a day earlier, when the government reported sales of new homes during April surged 16.2%. The 5.99-million pace of existing-home sales was the lowest since 5.94 million in June 2003, NAR said.

    "This suggests the housing market correction will continue, as expected, through at least the remainder of the year," Lehman Brothers economist Drew Matus said in a note to clients.

    The April resales level was below Wall Street expectations of a 6.18 million sales rate for previously owned homes. NAR senior economist Lawrence Yun had anticipated slower demand, however, pointing out many subprime loan products have dried up.

    "In addition, increased scrutiny by lenders is stopping risky mortgage origination, which is good for both consumers and the lending community," Mr. Yun said. "Fortunately, a wide availability of conventional mortgage products and the 4.5-million jobs created over the past 24 months will help to stabilize the market going forward."

    Federal Reserve's latest quarterly survey of banks' senior loan officers, conducted in April and released last week, showed lenders tightened standards on subprime and nontraditional mortgages.

    "We are not at all surprised that home sales would be weak in April in particular and most likely all spring, as uncertainty surrounding the subprime mortgage situation definitely appears to be encouraging potential buyers to sit on their hands a while longer to see what the market will look like when the dust clears," wrote Stephen Stanley, chief economist at RBS Greenwich Capital Markets.

    The NAR reported inventories of previously owned homes rose by 10.4% at the end of April to 4.20 million available for sale, an 8.4-month supply at the current sales pace. That's way up from a 7.4-month supply at the end of March.
    The median price for a home previously owned was $220,900 in April, down 0.8% from $222,600 in April 2006 but above March 2007's $217,400.
    "The inventory glut has halted much of the rise in prices, but there are still only modest declines" year over year, MFR Inc. economist Joshua Shapiro wrote in a note to clients. "The 6.0-month supply used to be an average, but it fell to the very low level of 3.7 months as recently as January '05, and that it is back well above a 6.0 month level, reaching over 8.0 months, is a very good indication of the continuing slowdown in sales and likely downward pressure on prices."

    Remember, this follows the news yesterday that Builders began jetisoning excess inventory by making huge price cuts in new homes.

    For those of you hoping that the market will turn around soon, crap in one hand, hope in the other, and see which one fills up first.