The problem are that the good, bad, and tiny percentage of catastrophes, have been sliced and diced, shuffled and riffled into packages that are hard to unpick. The experts thought that the actual value on the dollar was way more than the 22 cents on the dollar currently being bandied about.
The kernel of the problem is a manageable 3 %+. It is the way the debt has been restructured (and the the little commissions added on as it passes on out to the peripheral investors) that is the problem.
I am repeating what was discussed on NPR ;-) You can't be me, I'm taken
Sanity will only be restored when the thieves and con artists are run out of town on a rail and economies go back to trading real stuff for real money, not bullshit for promises.
There is an up side, which is that if enough of the main players die they'll take their funny money with them. Everyone else will take a big and messy hit, but the flip side of the concentrated leveraging is that if the circular firing squad of obligation can be persuaded to fire, the wackos will suicide and real businesses will be left shaky but standing and able to carry on - in some form or other.
The problem are that the good, bad, and tiny percentage of catastrophes, have been sliced and diced, shuffled and riffled into packages that are hard to unpick.
yup, how do you unbake a cake?
find the melamine in the milk?
they did it on purpose that way, to cover their collective ass... ~"When an inner situation is not made conscious, it appears outside as fate." Karl Jung~
The problem is the ones that aren't paid off. Mortgages were given for amounts far exceeding the real appraised value of the homes. That value has now dropped by as much as 20% in some ares. The homeowner will make the logical financial choice to walk away from the property asset and the mortgage and the bank will eat the loss. Unfortunately for the bank they have sold the "loss" a dozen times over exponentially magnifying the cost on their balance sheet.
That number is incorrect. It's at least twice that number. It not even correct for 2005 housing; I've read AHS 2005. Nobody has numbers but AHS and Case-Shiller. And there's been twice as much new construction and mortgage originations since release of that publication.
I will be back with references. Diversity is the key to economic and political evolution.
See American Housing Survey (AHS) 2005, pdf published Aug 2006, link Total number of HHs (homes) estimated was 108,872,000, of which 33,940,000 renter occupied and 74,931,000 owner occupied. Any estimate of the number of mortgages requires examination of the total population of HHs -- not merely "owner occupied" housing. An notice of census.gov collection methods follows.
In prior years, the American Housing Survey-National Sample was conducted biennially in housing units selected from the 1980 Census and new construction universe. Data collection for AHS-N was conducted in odd-numbered years. The last AHS-N was conducted in 2005 between May and September with a sample size of approximately 60,000 housing units. Also in prior years the American Housing Survey-Metropolitan Sample was conducted biennially in even-numbered years in 41 metropolitan areas on a rotating basis. The last AHS-MS was completed in early October 2004. The 2004 AHS-MS included 13 metropolitan sampling areas (MSAs) each with approximately 4,700 housing units [approx. 61K total sample]. The 2004 sample consisted of returning housing units selected from the 1990 Census and new construction universe. In early 2006, the Department of Housing and Urban Development (HUD), the sponsoring agency, made the decision to conduct the AHS in odd-numbered years only beginning with the 2007 data collection. We will no longer survey the national survey in odd-numbered years an the metro survey in even-numbered; however, we will collect data for bot the national and metropolitan sample at the same time. The 2007 AHS national sample will consist of approximately 55,000 housing units and the metropolitan sample will include seven MSAs each with approximately 3,000 housing units for a total of approximately 76,000 in sample. (Census.gov Demographic Survey Abstracts, Jan 2007 , pdf)
Also in prior years the American Housing Survey-Metropolitan Sample was conducted biennially in even-numbered years in 41 metropolitan areas on a rotating basis. The last AHS-MS was completed in early October 2004. The 2004 AHS-MS included 13 metropolitan sampling areas (MSAs) each with approximately 4,700 housing units [approx. 61K total sample]. The 2004 sample consisted of returning housing units selected from the 1990 Census and new construction universe.
In early 2006, the Department of Housing and Urban Development (HUD), the sponsoring agency, made the decision to conduct the AHS in odd-numbered years only beginning with the 2007 data collection. We will no longer survey the national survey in odd-numbered years an the metro survey in even-numbered; however, we will collect data for bot the national and metropolitan sample at the same time. The 2007 AHS national sample will consist of approximately 55,000 housing units and the metropolitan sample will include seven MSAs each with approximately 3,000 housing units for a total of approximately 76,000 in sample. (Census.gov Demographic Survey Abstracts, Jan 2007 , pdf)
See also most recent 2007 AHS National Data, dataset list. The downloads are *.exe, MS-DOS executable only. That excludes my machine.
See also AHS Table 8, "Housing Vacancies and Homeownership"
Doubtless periodic reports by independent researchers such as CalculatedRisk and Case-Shiller who maintain series data on inventory (existing, new) provide a valuable public service.
In "Fed: Household Percent Equity Declines" CR cautions, "31% of HHs do not have a mortgage. So the 50+ million households with mortgages have far less equity than 45.2%."
Oddly enough 33.1% was the percentage of 2005 owner occupied HHs not mortgaged: 24.776M HHs. (See Table 2, "The American Housing Survey and Non-Traditional Mortgage Products," HUD, Sep 2007; HUDUser.org/publications). CR implies the number of mortgages has increased 2.1% at least since 2005. "Occupied means", too, primary residence as distinct from "investment property."
Conversely, 66.9% should be the percentage of 2005 owner-occupied HHs mortgaged, or 50.1M HHs. However the detail of mortgage types for this class evaluates to 64.6% or 48.6M "owner-occupied" HHs, "regular mortgage and/or home-equity mortgage." 90% of these were conventional, fixed loans only. Additionally, AHS did not collect data for 4.5M "owner occupied" properties.
Additionally, 33.94M HHs were renter occupied in 2005. How many of these "investment properties" were mortgaged? The data do not say.
Additionally, 3.7M seasonal, or second, homes are excluded from the total of occupied housing in 2005. How many of these were mortgaged? The data do not say.
Is it reasonable to assume that the universe of mortgaged housing was closer to 90M in 2005 and likely peaked Q4 2007 around 100M? Yes, the lower bound of a conservative estimate of RE secured by "primary mortgages" is 85.9M - 87.9M.
The AHS considers a home to be "mortgaged" if it has one or more of the following: a regular mortgage, a lump-sum home equity loan, or a home equity line of credit. ...The AHS considers a home to have a "primary mortgage" if it has one or both of the following: a regular mortgage or a lump-sum home equity loan. ...The AHS considers a home whose only lien is a home equity line of credit to be "mortgaged" but not to have a primary mortgage. ["The American Housing Survey and Non-Traditional Mortgage Products," p9]
The FRB's Q1 2008 report of US Flow of Funds (Z.1 Release, Sep 2008) does not explain the number of residential properties mortgaged. Two Calculated Risk charts describe declines in mortgage holders' aggregated equity since 1952 and HH real estate assets and mortgage debt and housing value as percentages of GDP. The relevant FRB tables are as follows (download each table category to view).
Over the period Q4 2005 - Q4 2007 the value of all "home mortgages" increased from $9,383.8T to $11,239.0T, or 19.6%. Although AHS data tell us "occupied" housing increased from about 108M to 110M, or 1.85%, it doesn't tell us how much of the mortgage value appreciation is attributable to "primary mortgage" growth or additional inventory sales such as second homes and vacant "investment" property. Clearly the number of home mortgages retired is insignificant.
OK. That's enough of a critical read to whack NPR "reporting" -- understatement of the ages. Diversity is the key to economic and political evolution.
