Some interesting comments about the US market

[Aceyducey]

An extract from one of the newsletters I read...

Note all refers to the US housing market.

Fingers of Instability
[FONT=Arial, Helvetica, sans-serif]by John Mauldin[/FONT]
http://www.frontlinethoughts.com

In other published research, Rosenberg has noted that in the past, seven of the last ten housing downturns foreshadowed an outright economic recession. The lead time was long - about 20 months. The three housing downturns that did not precede a recession presaged a discernible slowing in overall economic growth within a year of the peak in starts, on average.

Then there was an interesting, if somewhat disturbing, bit of analysis in Barron's this last week on housing. Lon Witter argues that there has not been a housing bubble but a lending bubble. Look at this data:

• 32.6% of new mortgages and home-equity loans in 2005 were interest only, up from 0.6% in 2000;
• 43% of first-time home buyers in 2005 put no money down;
• 15.2% of 2005 buyers owe at least 10% more than their home is worth (negative equity);
• 10% of all home owners with mortgages have no equity in their homes (zero equity);
• $2.7 trillion dollars in loans will adjust to higher rates in 2006 and 2007.

Think that may portend trouble? This morning, CNBC reported that H & R Block, which has a large sub-prime mortgage division, said it would take a charge of $61.3 million, or 19 cents a share, to reflect an increase in the number of its sub-prime mortgage customers falling behind on their loan payments. You can bet that H&R Block's woes will show up at other subprime lenders, as borrowers with less-than-stellar credit histories struggle to keep up their payments in a higher interest-rate environment. And this is just the beginning of woes, as ARM rates are set to rise precipitously on well over a trillion dollars in the next year.

For those of you who would like more news on the housing market, good friend Barry Ritholtz, writing in his blog at The Big Picture, has compiled all his recent research on the housing market into one column. It makes for sobering reading. You can get to it at http://bigpicture.typepad.com/comments/real_estate_/index.html.

Cheers,

Aceyducey

 

[GreatPig]

The latest newsletter received today goes more into the US housing slump. It's titled "'The Biggest Slump in US Housing in the Last 40 Years' By Nouriel Roubini".

It doesn't seem to be on his website yet, but is based on Roubini's blog here.

GP

 

[RichardC]

I just found this on HotCopper which goes into US family wealth. I'm sure you will be surprised at the concentration of wealth where the top 1% of households hold 37% of the stockmarket and the top 10% owned 80% of the market. The average wealth of the 1% is $15million.

http://www.cleveland.com/business/plaindealer/index.ssf?/base/business/1156840646113880.xml&coll=2

The opening page will ask your zip code etc. I just clicked the non-US box and went through OK. It is worth the effort.