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Bill Fleckenstein: Next shoe to drop: Prime mortgages
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This Link is located in the Public Channel Housing Bubble and Bear Links.
Posted by ian 1 year 258 days ago (articles.moneycentral.msn.com). Views: 187
Tags: housing bubble |
| Related Tags: credit crisis gold wall street economics peter schiff inflation banks |
I believe the next area of the credit sector to implode will likely be Alt-A -- loans granted to people who didn't want to document their income, also known as liar loans -- which will help illuminate the fact that our mortgage problems were never just subprime. Rather, they sprang from one big credit bubble, thanks to which mortgages were handed out to anyone who could fog a mirror. Most people took on more than they should have. (Some are now walking away from their obligations, a development recently highlighted in the media.)
In time, it will be clear that prime mortgages are also vulnerable.
"You can almost draw (the credit unwind) out in a diagram," said a managing director at the Economic Outlook Group in Princeton, N.J. "With home prices going down, consumers cut back on spending. If consumers cut back on spending, the economy weakens further. If the economy weakens further, fewer people are able to afford mortgages, so home foreclosures increase."
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