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To: reaper who wrote (179942)	7/15/2002 4:10:42 PM
From: Oblomov	Read Replies (1) \| Respond to of 436258

>> WHY are spreads widening IMO, its just a consequence of what is happening with the economy. I think that the scenario you posited a few months ago (collapse in Treasury yields across the board) is coming true. MBS spreads were pricing in a recovery, which appears to have been based on false hope. From what I hear, the market mechanism is working. There is no liquidity problem if 1998 is used as a benchmark. I'm not convinced that MBS spreads and real estate prices are strictly linked. When spreads exploded in the late 70s/early 80s, real estate also performed well. But I can't see real estate performing well under current economic conditions. A debt deflation would pressure the price structure - that is, high-end houses would fall in price while the low-end and mid-priced houses would have some price stability. Bob Bronson at the Longwaves forum has posited a 5% drop in price per $100K peak value. That would be similar to a 1930s deflation in housing values, so it may be aggressive or conservative depending on your perspective.