Ready for a second wave of home price declines and defaults?
While the first round of massive house price declines and defaults stemmed largely from the bursting of the real estate bubble and has mostly been limited to sub-prime loans and low to medium-priced homes, a possible coming next wave may also include a harsh downdraft from the recession. Coupled with tightening lending standards from the credit crisis that are now preventing more and more home owers with even good credit from refinancing loans on homes that they are increasingly becoming upside-down in, another leg down in housing may be on the way.
From today's New York Times:
By VIKAS BAJAJ
Published: August 4, 2008
Housing Lenders Fear Bigger Wave of Loan Defaults
The first wave of Americans to default on their home mortgages appears to be cresting, but a second, far larger one is quickly building.
...“Subprime was the tip of the iceberg,” said Thomas H. Atteberry, president of First Pacific Advisors, a investment firm in Los Angeles that trades mortgage securities. “Prime will be far bigger in its impact.”
In a conference call with analysts last month, James Dimon, the chairman and chief executive of JPMorgan Chase, said he expected losses on prime loans at his bank to triple in the coming months and described the outlook for them as “terrible.”
When do you see an end to the declining home prices in the U.S.?
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