Skip to main content

Default & Foreclosure Rates For US Homes


Despite the bailouts for Fannie & Freddie and the housing package in the US, defaults and foreclosures are rising rapidly, and not even flattening out. Mortgages in the sub prime category: 8.4% for all sub prime mortgages taken out in 2005 are now in default or foreclosure; for sub prime mortgages taken out in 2007, the default/ foreclosure rate now stands at 16.6% as at June, a pretty sharp hike from May's 15.8%.

The trouble is these high default rates are not just in sub prime but is flowing into other mortgages as well. One rung above sub prime is what they call Alternative-A category. The default/ foreclosure rate here has jumped 300% in April from a year ago to hit 12% (which isn't that far from the sub prime default/ foreclosure rate).

Even some of the prime loans are being hit as well. The default/ foreclosure rate has doubled in April to 2.7% from a year ago.

Even with the bailout packages, housing prices are not likely to do a V-shape reversal but rather a prolonged U-shape reversal. The default rates are going to go much higher before improving. That being the case, consumer spending should see some curtailment. The much weaker oil prices may help ease the burden but it pales into insignificance when a household compares its oil/gas/electricity bill with the ballooning house payments and home equity being erased rapidly.
I think the bigger financials in the US have done most of the needed write downs and recapitalisation, but we shall now see the smaller US regional banks falling like dominos. They are the ones left holding the bag, so to speak. Either the US allows for a wider scope for foreign funds to invest in these banks or we will see another mini meltdown.



Comments

see said…
Here's an idea to solve property overhang, the next president should encourage massive influx of migrants to take up houses which may be foreclosed....Obama might like that idea becos will please his liberal supporters & make him look like economy's hero

Alternative: blow up excess supply of houses, that should bring demand & supply back in sync
Hello. This post is likeable, and your blog is very interesting, congratulations :-). I will add in my blogroll =)THANX FOR MAKING SUCH A COOL BLOG




Stop Foreclosure

Popular posts from this blog

My Master, A National Treasure

REPOST:  Its been more than two years since I posted on my sifu. This is probably the most significant posting I had done thus far that does not involve business or politics. My circle of close friends and business colleagues have benefited significantly from his treatment.


My Master, Dr. Law Chin Han (from my iPhone)

Where shall I start? OK, just based on real life experiences of those who are close to me. The entire Tong family (Bukit Kiara Properties) absolutely swear that he is the master of masters when it comes to acupuncture (and dentistry as well). To me, you can probably find many great dentists, but to find a real Master in acupuncture, thats a whole different ballgame.


I am not big aficionado of Chinese medicine or acupuncture initially. I guess you have to go through the whole shebang to appreciate the real life changing effects from a master.


My business partner and very close friend went to him after 15 years of persistent gout problem, he will get his heavy attacks at least…

Long Weekends

Passengers - Go Watch It

Passengers. Brilliant story telling. Visionary yet believable. Like Martian, only better. Space travel, science, romantic, desolation, philosophical, mortality n its devastation, spectacular imagery. Being human n humane. 9.7/10