socalhousingbubble_IHB
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<p>Dean Baker is extremely liberal, but was man enough to sell his residence in 2004 simply because of his belief in the bubble. Gotta admire that level of conviction (even though I don't agree with him at all on Social Security).</p>
<p>He has had some great MSM commentary in the last week or so on <a href="http://www.prospect.org/csnc/blogs/beat_the_press">his blog</a>. Here is a recent sample:</p>
<p class="blog_entry_title"><strong>Tell Ben Stein, IT AIN'T SUBPRIME</strong></p>
<p>NYT columnist Ben Stein tells everyone that they being <a href="http://www.nytimes.com/2007/08/12/business/yourmoney/12every.html?ex=1344571200&en=e406bda6e8acd743&ei=5090&partner=rssuserland&emc=rss">Chicken Littles</a> because they are worried about the fallout from the subprime meltdown. Mr. Stein calculates that of the $10.4 trillion in outstanding mortgages, only about 13 percent or $1.35 trillion is subprime. Of this, only about 5 percent, or $67 billion is actually in foreclosure. If the losses on foreclosed loans is 50 percent then we're talking about $33 to $34 billion. That's not a lot of money in a $14 trillion economy.</p>
<p>The problem is that the Chicken Littles are a bit better at logic than Mr. Stein. The subprimes are melting down because house prices are worth less than mortgages. This is leading to rapidly increasing default rates in the Alt-A and prime markets as well. It does not make a lot of sense to payoff a $600,000 mortgage on a home that's worth $400,000. </p>
<p>The problems are showing up today in the subprime market because these are the people with the least resources and therefore the ones who are first forced into default. However, as time goes by, and more homeowners realize the situation they are in, the subprime meltdown will turn into the prime meltdown. The chicken littles know this, which is why the markets are panicking. </p>
<p> </p>
<p>He has had some great MSM commentary in the last week or so on <a href="http://www.prospect.org/csnc/blogs/beat_the_press">his blog</a>. Here is a recent sample:</p>
<p class="blog_entry_title"><strong>Tell Ben Stein, IT AIN'T SUBPRIME</strong></p>
<p>NYT columnist Ben Stein tells everyone that they being <a href="http://www.nytimes.com/2007/08/12/business/yourmoney/12every.html?ex=1344571200&en=e406bda6e8acd743&ei=5090&partner=rssuserland&emc=rss">Chicken Littles</a> because they are worried about the fallout from the subprime meltdown. Mr. Stein calculates that of the $10.4 trillion in outstanding mortgages, only about 13 percent or $1.35 trillion is subprime. Of this, only about 5 percent, or $67 billion is actually in foreclosure. If the losses on foreclosed loans is 50 percent then we're talking about $33 to $34 billion. That's not a lot of money in a $14 trillion economy.</p>
<p>The problem is that the Chicken Littles are a bit better at logic than Mr. Stein. The subprimes are melting down because house prices are worth less than mortgages. This is leading to rapidly increasing default rates in the Alt-A and prime markets as well. It does not make a lot of sense to payoff a $600,000 mortgage on a home that's worth $400,000. </p>
<p>The problems are showing up today in the subprime market because these are the people with the least resources and therefore the ones who are first forced into default. However, as time goes by, and more homeowners realize the situation they are in, the subprime meltdown will turn into the prime meltdown. The chicken littles know this, which is why the markets are panicking. </p>
<p> </p>
