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View Diary: Welcome to the Wonderful World Of Commodity Inflation (175 comments)

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  •  Lennar/subprime (1+ / 0-)
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    sdgeek

    Of the mortgages that Lennar originated, 1 percent were subprime loans, Chief Financial Officer Bruce Gross said in a conference call. link

    Lennar's $848 million writeoff was due to the falling value of real estate. That of course affects people broadly, particularly in home equity borrowing. The value of a home is not concerned with whether the occupant's loan is subprime, alt-A or prime, and those values are falling.

    There was a woman interviewed for a TV profile piece--aimed at putting a "human face" on the problem--complaining that she couldn't sell her home (of course at the price she wanted), self-righteously saying that she was not one of those subprime people. She had put substantial money down, made all her payments, lived within her means, etc. etc. She didn't seem to realize that the mythical price she thought she should get was inflated precisely because of loose lending policies in the housing market as a whole. Dr. Robert Shiller sees a possible 50 percent drop in some areas, to bring historic rent/buy ratios back. See: http://www.bloomberg.com/...

    •  Rent/buy ratio: good measure (0+ / 0-)

      It's actually one of the measures I privately use to determine if prices are fair. And I suspect that it may be more than a 50% drop. On the flip side, I also expect rents to go up quite a bit. After all, the same people who are now displaced from their overpriced homes have to still live somewhere, and many won't be eligible for another mortgage for quite a few years.

      The other tool I use is simply to look at what comparable sales were in 2001.

      Army 1st Lt. Ehren T. Watada, Lt. Cdr USN Matthew Diaz, SPC Eli Israel: true American heroes.

      by sdgeek on Tue Sep 25, 2007 at 10:27:19 PM PDT

      [ Parent ]

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