MWF (Friday) Briefing:
Contagion from the credit crisis unexpectedly created systematic weakness on a global scale working at hyperspeed. According to Morgan Stanley, 45% of Asia's GDP was tied into export industries that fed American consumerism. That consumerism was based on the assumptive that their real asset savings (homes) would appreciate forever... and they borrowed against their homes to fuel their consumption. The first wave of foreclosures has begun to peak. Now a second wave is building up for Alt-A. Tie into that home equity loans and credit card run ups.
Contagion from the credit crisis unexpectedly created systematic weakness on a global scale working at hyperspeed. According to Morgan Stanley, 45% of Asia's GDP was tied into export industries that fed American consumerism. That consumerism was based on the assumptive that their real asset savings (homes) would appreciate forever... and they borrowed against their homes to fuel their consumption. The first wave of foreclosures has begun to peak. Now a second wave is building up for Alt-A. Tie into that home equity loans and credit card run ups.
- Los Angeles had 9,100 foreclosures over the past 18 months. More than 35,000 homes are in default. That a 300% jump in one year. L.A. is now slated to use $1.2 billion in Fed Funds to buy foreclosed homes and resell them to consumers. Last year, L.A. officials saw mostly sub-prime loans default. Now "middle class" loans are beginning to default. The second wave of Alt-A defaults should begin in 2009 as they start to reset. Press Telegram McClatchyDC
- One third of new home owners owe more than their homes are worth.Bloomberg
- Home equity loans outstanding went from about $1 billion in the 1980s to $1 trillion at the height of the bubble. Borrowers are falling behind on their payments at near record levels and could lose their homes. NYT
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