More mortgage fiasco reporting

From today’s San Francisco Chronicle:

The subprime mortgage fiasco stands to cost the Bay Area economy more than $5.4 billion next year, according to the latest report intending to put a dollar figure on the rising wave of real estate foreclosures.

The lending crisis will cost the national economy $166 billion and 524,000 potential jobs, said the report […] In addition, homeowners across the country will lose $1.2 trillion in property values in 2008.

[…]”Today the foreclosure crisis has the potential to break the back of our economy, as well as the back of millions of American families.”

[…]The mayors’ report did not forecast a recession, but it said 128 metropolitan areas – including the San Francisco-Oakland-Fremont metropolitan statistical area – would see GMP growth fall into the “sluggish” category of below 2 percent.

[…] with estimated losses of $3.6 billion in the San Francisco area, the Bay Area stands to lose at least $5.4 billion[…]

By most estimates, the number of foreclosures could peak in 2008, when the next batch of mortgage interest rate resets is scheduled to occur[…]

[…]Economic growth will be cut by one-third in 65 metropolitan areas and by more than one-quarter in 143 regions.

[…]One expert on the Bay Area economy, however, said the study overstates the size of the impact. First, economist Ken Rosen said, the GMP is inherently an imprecise measure that involves cobbling together varying economic indicators on a local level.

Second, Rosen said he believes investors in subprime mortgages – who may be far afield – will likely bear the economic brunt of the subprime meltdown, not local economies.

“Most of the loss is not to the homeowner, but to the owner of the mortgage, and they’re not regionally concentrated in the Bay Area,” Rosen said. “We’ve exported maybe a quarter of this loss to the rest of the world.”

[…]Several recent studies have attempted to quantify the ripple effect of the subprime debacle.

Last month, the Association of Community Organizations for Reform Now found that nearly 4,800 subprime loans made to Bay Area borrowers in 2006 probably will fall into foreclosure in the next couple of years, costing homeowners, cities and lenders as much as $1.5 billion.

A report by another advocacy group found that foreclosures in the Bay Area could depress neighboring home values by as much as $11.6 billion.

And finally, research by the U.S. Senate Joint Economic Committee found that California homeowners are at risk of losing $23.6 billion in housing wealth if real estate prices continue to decline and foreclosures soar[…]

There you have it. Sounds like a hung jury. We can all agree things have changed. We can all agree they might continue to change. And we can all hopefully agree that nobody knows exactly to what extent they will change.

We’re going to go write a couple an offers on some a homes today and see just how skittish this market is, because the scale of what they’re reporting, we’re not seeing. Little bits here and there, but not all out disaster.

Mortgage crisis expected to cost Bay Area $5.4 billion next year [San Francisco Chronicle, Kelly Zito]

Leave a Reply