Interesting that the paper made a 2.2 million forecast. The press soft pedaled that. But the $160 billion losses (not high relative to other estimates) seems low relative to the number of homes lost.

Looking forward to reading the methodology.

It’s on Pg. 3. Here’s the link:
http://responsiblelending.org/pdfs/
foreclosure-paper-report-2-17.pdf

If one can make a coherent argument that such a drop in prices would be a financial calamity that we must struggle to avoid, that should be balanced against the point that sustained high housing prices is a significant ongoing burden to our economy. Does our economy really gain anything of lasting value from expensive housing?

I give you credit for trying to sort this out as a non-finance type. The nomenclature and concepts take a while to get down. And a lot of people out there are imprecise in how they present things, which doesn’t help either.

Not to put an ad in a comment, but the post I just put up has a very good article by the FT’s Martin Wolf in which he says pretty bluntly that people, particularly Bernanke, are panicking and pulling the policy trigger way too fast.

She proposed her idea in a comment section. CR has been overrun today by the “let em burn” crowd and she was bemoaning the lack of a solution that avoided moral hazard or taxpayer abuse.

I didn’t really do it justice above (or, likely, below). I requested that she form a CR post around it, but we’ll see.

I think the idea was that the agency WOULD be buying out entire mortgage securitizations. This allows the agency to come out neutral or ahead by acquiring the good loans along with the bad. If the children can’t play nicely with their toys, take them away. Yes, this is pretty unworkable, but it’s a better starting point for practical solutions than any of the others I’ve seen.

I’m certainly no finance guy, I just sort of stumbled into this mess after the hedge funds imploded and I got curious about what was going on.

I had a long discussion of steep housing market declines towards the end of the Pimco post (I imagine many readers got tired). The “mysterious economies” include the UK, Finland, Sweden, and Hong Kong. As discussed, the fall in Japan was WAY worse than 25%.

There are links in the text to both the Bill Gross/Pimco post and the Economist story on recessions.

I’m interested in these mysterious other economies enduring 25% or more home price declines. I assume we are talking Japan…I’d like to see your list with dates.

I am also intrigued by the idea of what’s so bad about a recession, would like to read more.

Given that IMF World Economic Outlooks in February 2004 and I believe also in late 2003 reported that house price rises in ‘many industrial countries do not seem to be fully explained by fundamentals’, no doubt that 3 1/2 years later people seem shocked to discover what became progressively more evident, but conveniently ignored. Perhaps mentalities conditioned by the prior rapid rise in equity prices and the historically misinformed notion that ‘real estate never loses value’.

I favor your perspective with its comprehension of generally ignored but certainly real technical difficulties.

Thank You

Touche.

Recall that Cagan sees the foreclosure as more protracted, over 6-7 years. The calls for action make it sound as if this is all going to hit the fan in 2008.

One reason I am being somewhat contrary on this one (even though I do agree things are bad and Something Should Be Done, just not a massive Federal purchase of doggy mortgages) is that the tone in the press and among commentators has gone from complacency to gloom and desperation.

For instance, that Cagan study was out in March. The Economist (hardly a bastion of bearish thought) declared the US housing market to be 20% overvalued in 2005. Yet people seem shocked, shocked that things are playing out as some experts predicted.

But that’s what you get when the association that represents industry salesmen manages to establish itself as the primary source for information.

In March, Cagan estimated that 1.1M homes will be foreclosed on AND that an additional 70K will go down for every one percent decline in the average national price of homes. YOY we are at what, negative 3%?, so that would make another 210K foreclosures. A 10% decline and Voila, you have your 2M foreclosures.

Thanks for the report link; was the most rational and thorough of anything I have read. btw – love the use of the word “granular.”