Here are the numbers that the negative media did NOT report from Duncan’s speech:
1. Thirty-five percent of the homes in the U.S. do NOT have a mortgage.
2. Some 94.88 percent of the loans ARE performing.
3. The foreclosure problem in this country is really a story about seven states.
4. The biggest foreclosure problems are in Michigan, Ohio and Indiana. These are manufacturing states that had horrible job losses. Since 2001, Michigan has lost 300,000 jobs. These states would probably have had problems no matter what the market was doing.
5. The other four states — California, Florida, Nevada and Arizona — experienced significant overbuilding. Twenty-five percent of the foreclosures in these states are on properties that are held by investors who were speculating.
6. Only 25 percent of all mortgages are subprime, and of these, 75 percent are performing.
7. In the other 43 states, foreclosures have fallen in 2007 from 2006 (data from Michael Clawson, vice president, Central Texas Mortgage).
................
90 mln homes in the USA
-35% that doesn't have any mortgage
= 58.5 mln homes having a mortgage
-94.88% of these mortgages are performing
= 3 mln homes have a non-performing mortgage
the average mortgage is about 200,000$ so this works out to 600bln US$ total mortgage exposure on non-performing mortages.
Banks, insurers and other institutions all around the world have probably written off some 200 bln$ already which is 33.34%. This means that over all non-performing mortgages only 66.66% can be recovered...seems pretty conservative to me.
Now you get some more food for thought.
According the Mortgage Bankers Association the first mortgage applications took a huge from 530k applications to almost 1,080k applications in January 2008 (see below)
parallely I read "housing starts reduced in Jan" - housing permits declined in Jan" etc.
Do you know what that mean?
People starting to purchase cheap second hand houses instead of taking the cost risks of building a new home. This will definitely stabilize the housing market because people who can't pay their mortgage might have a better chance to sell their homes to avoid a forclosure which is far more expensive. On the other side the downturn on the US-housing market will have a lot of winners - millions of people will have to spend less on their home purchases and an spend a lot more bucks for consumers spendings.
Don't let the media fool you. A lot of institutions are currently interested in spreading panic all over the place. It's much easier to rlease some further write-offs and dispose of the skeletons in your toilet. I bet we'll see some huge reversions in write-offs late this year/early 2009 and the banks will be in much better shape than they appear right now. You really don't think that investment professionals like Tamasek and all the other Asian investors pump money in desperate companies?
(20min delay)