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Old 04-07-2010, 02:01 PM   #21
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Originally Posted by kcowan View Post
If we try to size the next bubble, there are an average of $9.1 Billion in mortgage resets bubbling up between April 2010 and October 2012. That would be 30 months of bubble for a total of 30x9.1 = 270.3 Billion of bubble. So the question is: How much of that bubble will turn bad and can the banking system absorb it all? How much has already been written down, if any? What will this do the fragile real estate recovery?
I don't think anyone knows. But if you look at the older chart, you'll see that sub-prime was as large as the Alt-A and Option ARM stuff combined . . .

Mitigants to the the next wave of resets are several. Credit quality is generally better. Interest rates are lower. Bank capital ratios are stronger. Leverage throughout the system is lower. Some of the worst of these loans have already defaulted. Banks carrying values have to be lower than they were in 2007.

Meanwhile, unemployment at 9.7% means that some of these loans that were made to good creditors are less good now.

Personally I think the combination of better capital ratios for the banks and lower carrying values means that we're in much better shape to deal with this then we were in 2007. That doesn't mean the housing market isn't going to suck wind for some time to come, though.

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Bloomberg update
Old 04-20-2010, 01:32 PM   #22
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Bloomberg update

Bloomberg article here Housing Market May Not Be That Weak, Shiller Says: Tom Keene - reporting that Shiller has moderated slightly his previous tone
“The indicators have turned up, so my case has weakened a bit,” Shiller said. “While home price increases began to slow in November, they haven’t declined on a seasonally adjusted basis. We’re kind of in a holding pattern, where it’s very hard to tell.”
He has gone from "I think housing prices will continue to decline" to "I'm not sure".

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