The Impact of the Subprime Mortgage Squeeze Across the U.S.

This lovely Sunday morning info-porn comes to us via the NYT

click for ginormous chart:


graphic courtesy of NYT


In the Shadow of Foreclosures
NYT, April 6, 2008

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What's been said:

Discussions found on the web:
  1. Eric commented on Apr 6

    Barry, I hope you will comment on Saturday’s Times story re: the vulnerability of home prices and mortgage debt in European markets. I was astounded by what I read.

  2. cinefoz commented on Apr 6

    Let’s see.

    In the worst part of subprime hell, in Fort Meyer’s FL, 15% of the mortgages are subprime and 24% of those are in foreclosure. This translates to a WHOPPING 3.6% of total mortgages in Ft Meyers FL.

    In Sacramento, 15% of 17% equals 2.6% of total mortgages are subprime related and in foreclosure.

    In Dallas, 6% of 15% equals less than 1%.

    Sub prime mess = Media Hype? Mark to market write-ups are a comin’ (aka cookie jar reserves)? Financials are the best value in town if you have a moderate time horizon?

  3. Tanker commented on Apr 6


    First of all, the graphic shows only subprime mortgage FORECLOSURES. It doesn’t address subprime loans that are delinquent. It doesn’t address subprime loans that are scheduled to reset. It doesn’t address ALT-A foreclosures, delinquencies and coming resets. And the next wave, Payment Option Arms, where 80% of the holders pay less than the interest payment.

    You sound like Don Luskin last year saying he was buying financials “with both hands”. BWAHAAA! Go for it. Good luck!

  4. blin commented on Apr 6


    Could you please provide the link. I could not find the article.

  5. ProBush commented on Apr 6

    That liberal NYT and their propaganda. Barry, when will you understand that they are using you to spread liberal anti-big business lies not to mention socialistic/communist propaganda?

    There is economic utopia in America today and you just keep trying to shove this liberal propaganda down our throats to make Bush look bad.

    If there is any, and I say that with great disbelief, economic weakness it was all Clinton’s fault anyway.

  6. Ross commented on Apr 6

    If I recall, the ECB through $500 billion at the markets last December to quell the run on Spanish property. Europe is indeed vulnerable.

    But not just Europe. In late 2002 I bought a 60 meter flat in Moscow for $115,000. I sold it in July 04 for $185,000. Purchases and sales of Russian real estate back then were all cash transactions. Now they have a mortgage market. God help them.

    In 07 I tried to buy a flat in Sochi Russia where the winter olympics will be held. No luck with that one. Prices are obscene. Yea, it’s an international problem and not just Europe.

  7. Winston Munn commented on Apr 6

    “There is economic utopia in America today and you just keep trying to shove this liberal propaganda down our throats to make Bush look bad.

    If there is any, and I say that with great disbelief, economic weakness it was all Clinton’s fault anyway.” End Quote

    Now I know why sharks eat their young.

  8. Owner Earnings commented on Apr 6

    Cinefoz, if the houses are so “undervalued” that you will expect these banks to “write-up” what they just “wrote-down” then why aren’t the homes selling? Have you seen the data on home sales and/or home inventory lately? I’ll assume the answer to that is NO and/or NO.

    More specifically, have you looked at those houses in Cape Coral? The majority are STILL overpriced. The ones that are becoming “fairly valued” (by no means under priced) are short sales. Per the lowest priced houses in any given house range, according to square feet, begin with the disclaimer “This is a Short Sale subject to Bank Approval.” But guess what, the short sales aren’t selling!

    Why do you think that is?

    If you are irrational you might think this:
    Houses are so cheap that people are simply falling all over themselves trying to buy these houses, which is somehow slowing down the buying process. Maybe there are simply not enough flights (even though 4 airlines went bankrupt last week) into the Ft Myers area that the would be buyers (buyers would have to be flying in to buy these houses because clearly the local economy can’t support these prices) can’t get to these houses fast enough.

    If you are rational you probably think this:
    Buyers aren’t buying because the houses are still over priced.
    Buyers can’t get financing. (Have you tried to get a loan lately? Talk about full doc. Also, I doubt most people will get financing unless they can put 20% down. Who has 20% to put down? Well, the people who don’t need to be buying (own their house and have no mortgage) are the ones who have 20% to put down.)
    Sellers (especially the banks in short sales) aren’t willing to take fair offers. (Because they are in disbelief that the house has gone down in value, or because they don’t understand investing and would rather sit on the house and lose more money, or because they have some vested interest in not taking a lower price, like for example a bank wont record the loss on the house until it sells the house)

    Now let’s look at the “WHOPPING 1% (I’ll give you the benefit of the doubt that it’s that low nationwide) of all loans in foreclosure.” Assuming the housing market is $24 trillion, then that would be a $240 billion drag on the economy, especially once all the trickle down effects are felt. Assuming that US GDP is $14 trillion then $240 billion real estate problem would be a 1.7% drag on GDP. Did you see the GDP numbers for last quarter? .6%. Clearly that is a big deal.

    Lastly let’s review the idea of buying financials if you have a moderate time horizon. Just how moderate are you talking about? Last time I checked, Japan’s Nikkei is still over 50% lower today than it was 18 years ago.

    Thanks for posting. I need to run through the motions every so often.

  9. gunthestops commented on Apr 6

    Winston Munn

    The ProBush guy must be a spoof on the neo-cons, no one could be that stupid!

  10. portland Refugee commented on Apr 6

    Don’t forget yesterday’s post re: lenders allowing owners to stay in their homes and or delaying foreclosure proceedings. (i.e. data has yet to reflect)

    The problem is much worse.

  11. Nowlook Atwahimholding commented on Apr 6

    “If you’re just joining us, we are standing in front of the most secure vault in the US, the US Mint, where US government issued gold and silver coins are flying off the shelves in the greatest coin sales frenzy in US history!! That’s where I want my money!!!

    Make no mistake, if you’ve been sitting on the sidelines up until now, take a look at this:
    [vfx: rows of cheesey looking US gold coins]
    [vfx: Wall Street commodity trader’s pit]

    That’s right, now is the time to buy gold coins, this is the greatest boom in gold ever, you cannot delay because gold is on the move, and we cannot hold these prices!

    [vfx: tanks shelling mud huts in Afghanistn]

    Gold is your chance to protect your family. War and violence is exploding across the globe, with the threat of nuclear terrorism:
    [vfx: ICBM launching, red mushroom cloud]

    The financial market meltdown will take the world into a global depression. By this time next month, gold could be $1200, or even $2400 an ounce! Protect your retirement by buying original US government issue gold coins from the US Mint at West Point!
    [vfx: cheesey pile of gold coins kibbled over by obviously fake bank guards actors]

    Thanks guys. Isn’t that incredible???!!”

  12. Winston Munn commented on Apr 6

    Although interesting, the chart only shows one aspect of the greater problem – home prices.

    To sustain the runup in valuations, weaker and weaker borrowers using more and more leverage were necessary to utilize as buyers.

    Greenlaw, Hatzius, Kashyap, and Shin – a paper for which Barry provided a link – reveals the real problem.

    From 2001-2003, 10% of all mortgage originations were Alt-A or subprime. In 2004, that number increased to 25%, and in 2005-2006 it was 30%.

    There are approximately 50M households in the U.S. with a mortgage.

    A 15% drop in value would place $2.6T in equity underwater.

    Regardless of the rate of foreclosures, it is the contraction of credit availability due to falling home prices that will cause problems foreward going.

  13. SPECTRE of Deflation commented on Apr 6

    If you haven’t eaten today, do not read this article because it will ruin your appetite the rest of the day:

    The Subprime Crisis is Just Starting
    by Daniel R. Amerman, CFA | March 20, 2008

  14. donna commented on Apr 6

    Be more fun to show the reverse graph of the collapse of housing prices as big smoking craters everywhere….

  15. Roger Bigod commented on Apr 6

    It should have little moving dots for people walking away.

  16. Jack Stevison commented on Apr 6

    is there any way to superimpose the time magazine cover from june 2005 over the top of that chart? now that would be good humor.

  17. Bob A commented on Apr 6

    Resolution Trust II is coming soon.

    I think we’ll also see someone propose opening the immigration gates to 10 million or so aliens with down payments and decent credit who are willing to commit to buying a vacant house.

  18. Darkness commented on Apr 6

    Probush. Ah, I love the smell of sarcasm in the morning.

    Cinefoz, there does seem to have been an over-exuberance in the bank write-downs, in the short term, but given the banks’ stunning skills with numbers (more sarcasm) I think they are going to get burned again. But like you said, “moderate” term. I’d say “short”, but whatever. The market does indeed seem to be pricing things in farther and farther ahead of time, leaving contrarians in a great position. (Disclosure, I only have mutual funds, so this is all just academic for me and reinforces that I should stay away from playing the markets.)

    One of the things that is always vague about these charts and makes debates difficult, is how exactly the counting is done. Foreclosure is a process, a transient state, or it is supposed to be. So, when a chart says “houses in foreclosure” is this literally, houses in that part of the process during the month of december? Well, trouble with that is, if the foreclosure goes slowly the house will be also on november and january’s charts too, right? Is it only new houses added to the foreclosure pool in that month? I want to see a chart of houses that went through foreclosure in the last 12 months vs. the previous 12 months. Some timespan long enough to average that out. Because like home sales, foreclosures themselves are seasonal. Not that I believe cinefoz, but I also don’t think these charts tell the whole story.

    Cinefoz, to use Sacramento’s 2.6% of homes example… that’s 2.6% just that month. You have to keep that in mind. It’s not a cumulative number from Jan 2007 to Dec 2007, which I think would be a more meaningful number. In december 2007, 1395 houses were sold, total, out of 263,811 in the county (75% of which have mortgages). 2.6% of the total number of units with mortgages is 5144 in foreclosure. Basically you are poo pooing a situation as meaningless where 4 times more houses went into foreclosure than were sold just in december.

    And Dallas: 484,053 total units (65% with mortgages). 1% in foreclosure = 3147 units in foreclosure in december. Total sales in December: 5257. So still far and away enough to drive the market, which is not a healthy selling situation, which will continue to drive people under water, which will continue to drive write-downs… in the long term.

  19. Bob A commented on Apr 6

    Many higher end prices around the Seattle area dropped 10% or so since the last published figures which were pre Bear Stearns. And things aren’t exactly hopping even at those prices. Lot’s of builders wishing and hoping. Lot’s of them on the verge.

  20. ProBush-snark commented on Apr 6

    I, too, love the smell of sarcasm in the morning.

    Yes indeed, dear readers, it was snark. Just referring back to yesterday when someone accused Barry of using the liberal/commie/pinko rag, (the NYT) as a propaganda tool.

    The poster yesterday was blaming the messengers instead of those who created the mess we are in today.

    I have been fooled by snark more than a few times, even though I think that I am a pretty sophisticated person.

    The fun part is when those who the snark is aimed at don’t get it and think you are siding with them.

  21. AGG commented on Apr 6

    Good old Burlington at 8.3%. And just to think IBM hasn’t announced the plant closing here with a transfer of about 10% of the jobs to Fishkill, New York. IBM is the heart and soul of Chittenden county, Vermont. So far IBM has been quiet as a mouse. The same thing happened back in 2002 on a smaller scale; workers arrived at work and were fired the same day. For sale signs sprouted on lawns like dandelions in spring. I’m glad I don’t plan on selling any time soon. It looks like we’re going from computer chips to wood chips. What next, cow chips?

  22. evanesce commented on Apr 6

    Here’s a truly delicious irony: the Mortgage Banker’s Association is having trouble with, of all things, meeting its own mortgage payments on its new headquarters in Washington. I really wish I could make this stuff up. Article in the Washington Post is titled “Housing Crisis Hits Its Own: Mortgage Bankers Group Faced With Tougher Terms”, link is

  23. Winston Munn commented on Apr 6


    Well done. You sounded as convincing as Rupert from Fixed News who claimed the latest polls only proved that 81% of Americans are wrong.

  24. Pat G. commented on Apr 6

    Noticed that states on either side of the Rocky Mountain chain didn’t have much of a subprime problem. Oh yeah, populations are thin in those states. Tell you something?

    Where there were few people no market was being made. Probably viewed as not worth the effort.

  25. brian commented on Apr 6

    Cinefoz doesn’t know how to read a graph. The color index is 15% or greater, not 15% maximum. From 2006 stats 35% of all mortages in Naples were subprime. In 2006 20% of all mortgages in the US were subprime, 18% in 2005. Expect those foreclosures to keep growing.

  26. Darkness commented on Apr 6

    >Probably viewed as not worth the effort.

    Those are the places, too, where when you approach a house and say you are from a bank, the next thing you hear is the shotgun pump sliding back and forth. Not the kind of cha-ching bankers like to hear.

  27. IBH commented on Apr 6

    You have finally made the big time. Your blog post on Abadoned Homes has been carried by the NY POST (pg.36 Sunday).

  28. SPECTRE of Deflation commented on Apr 6

    IBH, Barry is routinely on CNBC and Bloomberg, so I believe he’s already there at the big time.

  29. cinefoz commented on Apr 6

    Looks like I picked a good time to hang out here a lot less. The paranoid underclass has really taken over. Next stop for these clowns … RoubiniLand.

  30. Darkness commented on Apr 6

    >IBH, Barry is routinely on CNBC and Bloomberg, so I believe he’s already there at the big time.

    Dude, I think that was more sarcasm…

  31. Mich(^IXIC1881) commented on Apr 6

    OT: TBP site reorg

    Barry, what I have noticed is that like retail , there is a lot of consumerism going on at TBP as well. By that, I mean people consume entries as they come in, not caring once there are 4-5 new topics. The correlation between topics and number of comments should be based on the subject, its importance, and its openness to subjectivity…but it seems the correlation is on how recent the posting is.

    I believe with a better organization of topics (which I alluded in another post) rather than FIFO through main page should help some subjects and valuable comments would be enriched by more deepening discussions.

    As such, why am I writing this site-redesign comment on this topic? Because like many others I am too lazy to search for your original “give me input for new site design” topic and also because nobody, you included would care who post what on an older topic whose 24 lifespan is passe.

    One solution would be to up the topic if there is a recent posting, like at yahoo message boards. this will keep interesting discussions at the top hence allow deep diving.

    You may say “this is not a public forum, it is my blog” but I come to this site as much for Winston, Ross, MS, etc. as to hear your take on relevant topics.



    BR: I appreciate the feedback — I think people will be quite pleasantly surprised when they see when its done . . .

  32. Chris noyes commented on Apr 6

    I’ve been watching a house for sale on bayfront property in Virginia Beach drop 199k in the last 6 months . It was listed 899k now to 700k. I called the listing agent and offered 450k . She said they take 600k . Funny thing is they had a offer for 600k 6 months ago. Here the listing link . City assement on land alone is 729k.

  33. spcwby commented on Apr 6

    Instructions To Serve Man**:Wash, Rinse…repeat!

    “The Boomtown Mirage”


    This ‘mirage’ will repeat many times more throughout the West

    (**Bonus points for the correct broadcast date)

    Btw LOTS of high end condo/loft projects are dead in the water (w/morbid sales office personnel) in Niketowne hq. area (ie Porland/Beaverton).

    So, let the conversion to apartments begin!

  34. ProBush commented on Apr 6

    Thanks, Winston. I guess that we hear so much that could be in “The Onion”, only these people are really serious, that our first impulse is to react without reading between the lines.

    Obviously, these people are incapable of rational or critical thought, so they blame the messenger.

    I actually had a very difficult time writing “ProBush” that I almost didn’t post at all.

  35. John commented on Apr 6

    I love graphs and charts.

  36. Winston Munn commented on Apr 6

    A related topic that gets little exposure is land values – the speculative pursuit by developers of land added around 50% of the total rise in housing costs.

    However, I’ve heard now that some of the same companies who sold the land are buying it back for $0.33 on the dollar. How can home values continue to be justified at a simple 10% decline when the land value is dropping 50-67%?

    At this rate, it would be cheaper to buy a parcel of land and have a home built that to buy an existing finished home, one would think.

  37. Mark E Hoffer commented on Apr 6


    someone above mentioned FIFO..I’m wondering when LIFO will be remembered, come back into vogue.

    BR, maybe the discussion of LIFO v. FIFO would be worth a blog post (?)

  38. Bob G. commented on Apr 7

    A home auction run by the Real Estate Disposition Corp. (REDC) on Saturday in Tampa was a wake up call. I sat through the disposition of 49 of the more than 100 properties auctioned off. The average sales price was $129,000. The average “previously valued to” number was $234,000. This was a 45% haircut. Granted, I didn’t inspect the properties which may have been gutted wrecks, but this indicated that we are not even close to the end of the decline in values.

  39. CJ commented on Apr 7

    Okay folks. After 15 years in finance (securitization) with 10 billion under my belt personally I can tell you that the mortgage losses between late 2006 and 2009 will be AT LEAST 1.5 trillion US dollars. This is bare friggin minimum if we roll 7’s till the cows come home. Good luck Americans. The party’s over and no one is cleaning up this mess with anything other than your 401k’s and pensions. The only other alternative is the decimation of hyperinflation and a glorious entry for the Amero.

  40. grumpyoldvet commented on Apr 7

    Winston Munn

    The ProBush guy must be a spoof on the neo-cons, no one could be that stupid!

    wanna make a bet????? :)

  41. grumpyoldvet commented on Apr 7

    sorry…………left off cinefoz from the comment

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