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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: jimmg who wrote (71359)	2/3/2007 3:47:15 PM
From: ChanceIs	Read Replies (1) \| Respond to of 306849

>>>There is no possible way that mortgage credit has grown faster than nominal real estate values over the past 4 years.<<< I would have to look at some numbers, but to be the devil's advocate, consider that every time a "zero down" is issued, the total debt (denominator) increases and the equity (numerator) doesn't change at all. Further consider that for the zero downs, the mortgage is growing at exactly the same pace as real estate values - since after all, the loan is for the total real estate value. Of course, those who put zero down and can hold will start having some owner's equity as soon as prices rise. When you have 0% to begin with, then even a $10K price increase won't increase the equity/debt ratio much. So this all depends upon how much money was borrowed at what time in the housing cycle. I am far from having a data based answer. However, it is my understanding that most of the bad loans - no docs, low docs, interest only, options ARM, etc, were made in the last few years.

To: jimmg who wrote (71359)	2/3/2007 4:02:38 PM
From: ChanceIs	Respond to of 306849

>>>Redux: There is no possible way that mortgage credit has grown faster than nominal real estate values over the past 4 years.<<< I failed to mention the dire consequences to the equity/debt ratio should prices be dropping. Equity decreases while debt remains fairly constant. If 90% of loans in the last four were 100% loans and issued in July '05, then sure as h&l, that equity/debt ratio would be dropping big time. Again, it all depends on the loan ratio, what locale, and when in the cycle. Oh - another point. All of that negative amortization in the option ARMS (see the 17 dead subprime lenders) will have a very depressing effect on the equity/debt ratio. Oh my. Throw in dropping market prices on top of those taking out equity via option ARMs, and ratio drops like a rock. For the third time, I don't have the numbers, so all of my arguments are very qualitative. However, I would take a stand that the equity/debt drop seen in the chart COULD* be real.

To: jimmg who wrote (71359)	2/3/2007 5:21:23 PM
From: Elroy Jetson	Respond to of 306849

The chart of declining homeowners equity is actually taken from the data prepared by the Federal Reserve. You can find the data in the Statistical Abstract of the United States. Its unfortunate you don't believe data which doesn't agree with your fantasy world, as you would quickly learn much about the real world. .