The problems are only beginning...

Quote from brokershopping:

NEW YORK (CNNMoney.com) -- More than two million subprime adjustable rate mortgages (ARMs) are poised to reset at much higher rates in coming months, worsening an already suffering housing market.

Just for amusement...

I don't know what it is, but if the average mortgage was 1/2 million.

2 million x 1/2 million =

1,000,000,000,000

If 10% walk away from their loans, it is 10 trillion dollars that someone is going to have to float. They will need to sell the all this real estate in a market of descending prices and tighter borrowing standards. Then you have the next wave of rate adjustments...
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10% of your figure is just 10billion! No big deal.
 
This Sentinal "Money Market" liquidity crunch is a bit of a worry. If funds start preventing redemptions from Money Market funds we could see a real run on the funds!

I wouldn't be surprised to see the FED step in again this week to provide more liquidity to the funds.

Sentinel Management Group Halts Client Redemptions (Update5)

By Jenny Strasburg and Matthew Leising

http://www.bloomberg.com/apps/news?p...1Vg&refer=home

Aug. 14 (Bloomberg) -- Sentinel Management Group Inc., the Illinois-based cash-management firm that oversees $1.6 billion, froze client withdrawals after saying that credit-market turmoil made it impossible to trade without incurring losses.
 
Quote from whitster:

devastation?

it's OPPORTUNITY.

people who overleveraged themselves will suffer

for others, its opportunities.

opportunities to get real estate CHEAP (just wait)

etc.

trading is all about buying others panic and selling their euphoria

everybody hated gold in 1998 and loved stocks. guess what? pretty good time to go long in gold.

everybody will start to HATE real estate pretty soon. i can't WAIT.

as long as people take dumb risks, and misprice assets (in either direction) due to greed, fear, etc. there will be opp's for traders.

gloom and doom serves nobody.

these are OPPORTUNITIES for traders (and investors)
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Bingo.

The current sub-prime mess is yet another chapter in a long, long story. Those of us who have been around remember previous chapters: the Savings and Loan Crisis, Long-Term Capital Management, the Dot-Com Bubble. The story goes way back before anyone of us was here; Galbraith and Mackay are well worth reading for those who want more.

One thing that I have NOT heard in the press in recent weeks is that one of the reasons why hedge funds "invested" in this sub-prime mortgage securities products is because they, as well as most of corporate America, have been flush with cash. Easy credit is partly to blame, of course, but the fact is that these have been good times. This isn't like the 1970's, when companies struggled to find the necessary capital to build their businesses. Companies increase their dividends, and increase them again, and still have too much cash.

Perhaps one of the reasons why Bernanke has been hesitant to cut rates (other than because he is an inflation hawk) is because he would like those with excess capital to invest in more stable, reliable investments (bonds, bills, notes), and not in speculative garbage like these packaged mortgage products. One of the reasons why Americans have not been eager to lend money to the federal government is because, frankly, the rate of return has been pretty pathetic. In the long run, that may well change.

Rising interest rates will only let more air out of the real estate bubble. There will be foreclosures, and cheap homes (again). The dollar may stop going down (sorry manufacturing). And in the long run, the purge will be good for the system, because that is how capitalism is supposed to work.
 
Quote from whitster:

this IS a housing bubble.

absolutely zero doubt about it

charts - it looks like a bubble

market participants - behaved in a manic bubble-state

it has every attribute of a classic asset bubble - EVERY one, ridiculous leverage, NEW PARADIGM (tm), etc. etc.

for me, the defining moment was CNBC interviewed two vegas strippers who had become real estate speculators!!

i am SO excited for it to pop. so many opp's out there
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My current home is the only piece of real estate I've ever bought, so I have a lot to learn on the topic of real estate speculation.

When the prices crater, what types of assets will you be looking to pick up? Residential, right? Single family homes, condos, or apartments? Urban, suburban, or rural? Seriously, I'm interested in hearing your strategy.
 
My $0.02...

I have been looking at commercial office space in chicago for the past 18 months or so just to get a feel. Commercial office to me means:

1) Longer leases
2) Repeatable processes/materials (maintenance) that can be consolidated for multiple properties in the same geographic area.
3) Built-in lease increases
4) Chicago is here to stay because of the cultural options it offers.
5) People can live like pigs, but you can't run a business that way for long. So the theory goes that it won't be mistreated at the same level as a residential property.
6) A lot of these buildings have significant equity, so attractive seller financing options can be structured to meet the 20% requirements.

I haven't purchased anything yet, so it is possible that I am wrong...but I have done homework and I will find out if I am right/wrong about commercial office properties in due time!

:D

Quote from Rearden Metal:

My current home is the only piece of real estate I've ever bought, so I have a lot to learn on the topic of real estate speculation.

When the prices crater, what types of assets will you be looking to pick up? Residential, right? Single family homes, condos, or apartments? Urban, suburban, or rural? Seriously, I'm interested in hearing your strategy.
More...
 
bubbles been going on for a Loooooooooong time. dutch tulip bulb scandal anyone?

heck, there was probably a frankincense and myrrh scandal in biblical times :)

as for what i plan on doing in real estate?

well, i just sold one house

got about a 70% return in 9 years.

i still have one house. i am waiting for seattle market to soften SIGNIFICANTLY. my house i have now is relatively modest 3br 2.5 bath. your basic single family home.

i know that when bubbles pop, the highest priced assets go down in price the most (both in dollars and in a %age basis).

so, basically, i will be picking up one of the nice 1/2 million dollar houses when i can get them around 380-410k.

i have little doubt they will come down to this level (or farther).

put @ least 2/3 down. park some capital there.
 
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