25 August 2006

The Big Picture: Is a Housing Crisis Approaching?

The Big Picture: Is a Housing Crisis Approaching?: "Lon Witter puts forth a different and intriguing notion. Witter observes that we don't have a Housing bubble, what the U.S. has is a lending bubble. His evidence is how loose the lending standards have become, and why not? The banks ultimately just flip the loans to the Fannie Mae (Federal National Mortgage Association, on the NYSE: FNM), where foreclosures and defaults become the headache of buyers looking for greater risk and return.
Witter claims his careful look at the reasons for the rise in housing give a good indication of the impact housing may have on the stock market. He observes the causes (in chronological order) of the rise and ultimate fall of Housing: 'The collapse of the Internet bubble, which chased hot money out of the stock market; rock-bottom interest rates; 50 years of economic history that suggested housing never goes down, and creative financing.'
More specifically, Witter's expectations are colored by rather disturbing data: "

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