It’s time for an update on the real estate bubble, which I have been watching since 2003. About a year ago, I laid out a timeline for the real estate boom. Knowing real estate happens in 16-year cycles, I juxtaposed the last boom/bust cycle in the early 90’s onto this cycle. Here’s what I came up with:
1990 (2007): Prices take a serious plunge. One article claims that housing booms are a bad thing and we should hope prices stay low. Increasing mortgage rates are blamed for the bust. The word “recession” is mentioned. Gloom and doom.
That’s next year. How many times do you think you will hear the words “looming recession” next year? More than you want to, that’s for sure…
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Filed under Housing Market, Mortgage News, Economy, Real Estate, Secondary Mortgage Market, Fannie Mae, Market Forecast, Mortgage Blog, Housing Crash, subprime meltdown, Lending guidelines by Godfather
WASHINGTON (AP) — The Federal Reserve, declaring that increased economic uncertainty poses risks for U.S. business growth, announced Friday that it has approved a half-percentage point cut in its discount rate on loans to banks.
The action was the most dramatic effort yet by the central bank to restore calm to global financial markets which have been roiled in the past week by a widening credit crisis.The decision means that the discount rate, the interest rate that the Fed charges to make direct loans to banks will be lowered to 5.75 percent, down from 6.25 percent.
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Michael Strauss, the founder and chief executive of American Home Mortgage Investment (AHMIQ), has faced a swarm of problems in recent months. One of the biggest, fastest-growing mortgage lenders in the country, its shares had slipped from a high of $36.40 last December to $10.47 by late July as the housing crisis deepened.
On July 31, things got decidedly worse. After the Melville (N.Y.) company announced that it would delay its dividend amid growing cash woes, panicked investors fled, sending the shares tumbling $1.04 by the end of the day. Six days later, American Home Mortgage filed for bankruptcy in Delaware (see BusinessWeek.com, 7/30/07, "American Home’s Credit Crisis").
Now, could Strauss potentially face civil insider trading charges as well?
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Filed under Scams, Mortgage News, Credit, Wholesale Lenders, Litigation, Mortgage Blog, Housing Crash, subprime meltdown, credit crunch, Alt-A Mortgage, Liquidity Crisis by Godfather
Aug. 15 (Bloomberg) — Countrywide Financial Corp., the biggest U.S. mortgage lender, fell for the fifth consecutive day on the New York Stock Exchange after Merrill Lynch & Co. raised the possibility of bankruptcy.
“Effective insolvency'’ would result should creditors force Countrywide to sell assets at depressed prices or investors lose confidence in its ability to raise cash, Kenneth Bruce, a Merrill analyst in San Francisco, said in a research note today.
Shareholders shouldn’t “understate the importance of liquidity,'’ Bruce wrote. “If liquidations occur in a weak market, then it is possible for CFC to go bankrupt,'’ said Bruce, who downgraded Countrywide to “sell'’ from “buy.'’ The company trades under the ticker CFC.
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