Housing prices to fall 11% in coming year
posted at 3:20 pm on October 21, 2009 by Ed Morrissey
Most homeowners thought they had weathered the worst of the collapse in the housing market — those who still have their homes, that is. CNN Money now says that any feeling of relief at stabilizing home values will only be temporary. Housing prices will fall another 11% by next summer, thanks to a new wave of foreclosures predicted in the coming months:
If you thought home prices were bottoming out, you may be wrong. They’re expected to head a lot lower.
Home values are predicted to drop in 342 out of 381 markets during the next year, according to a new forecast of real estate prices.
Overall, the national median home price is predicted to drop 11.3% by June 30, 2010, according to Fiserv, a financial information and analysis firm. For the following year, the firm anticipates some stabilization with prices rising 3.6%.
In the past, Fiserv anticipated the rapid decline in home-sale prices over the past few years — though it underestimated the scope.
Mark Zandi, chief economist with Moody’s Economy.com, agreed with Fiserv’s current assessments. “I think more price declines are coming because the foreclosure crisis is not over,” he said.
While the decline will be widespread, much of the damage will be contained to specific markets. These are the same that have already been hard hit by the housing bubble collapse, namely Miami, Orlando, Southern California, Las Vegas, and Phoenix, among others. Homeowners in these markets will see large decreases in their home values on top of what they have already lost, as much as 30% in Miami, for example.
However, almost all markets will feel the pinch. For many Americans, their home represents their greatest investment, with the equity used later to to boost retirement by downsizing. The size, depth, and breadth of these losses in an election year may have some significant impact on the midterms. Democrats will almost certainly try to blame George Bush, but they will have controlled Congress for almost four years by the time the elections come next November. With high unemployment and crashing home values in the forefront of voters’ minds, they will be looking to clean house … assuming, of course, that they still own one.
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With any luck at all, the coming hyperinflation will cause the housing prices to at least stabilize.
notropis on October 21, 2009 at 3:21 PM
And they’re creating another housing bubble by giving loans to low-income people. They’re basically re-creating the sub-prime mortgage mess, because what… the first one didn’t break the financial sector hard enough?
Enoxo on October 21, 2009 at 3:22 PM
This is why all the talk of inflation or even hyperinflation is silly. The bubble is still deflating so we will have deflation at least through 2010. We will not see any relief in unemployment or significant GDP growth until the Housing market bottoms.
Bill C on October 21, 2009 at 3:23 PM
Crap. I may be moving to another state in a few months for a new job.
rbj on October 21, 2009 at 3:24 PM
Good thing the Community Reinvestment Act is still in full force…
Seven Percent Solution on October 21, 2009 at 3:24 PM
Thanks for that bit of happy economic news…you must be a riot at your neighborhood parties…
right2bright on October 21, 2009 at 3:24 PM
It’s all Bush’s fault!
rjoco1 on October 21, 2009 at 3:25 PM
score one for the Deflationist Camp
jp on October 21, 2009 at 3:26 PM
Using the Case-Shiller Index of home prices, and calculating in data such as foreclosures, Fiserv predicted that median home prices nationwide would fall 11.3 percent – to $154,336 from $174,000 – between June 2009 and June 2010.
–It’s not in the coming year. It’s in the twelve months ending June 30, 2010. We’re already 4 months into that period.
Jimbo3 on October 21, 2009 at 3:27 PM
As long as my property taxes follow the decrease at least in proportion (not planning to move any time soon).
WashJeff on October 21, 2009 at 3:28 PM
I had an investment banker friend, a big money guy move to Santa Monica a couple of years ago, and he rented (while prices were still climbing). I said some adviser you are, can’t even buy a house. He stated I was nuts for buying a house.
He was right…he can now buy that house for almost 1/2 of what it was selling for, but he said last month, maybe next year he may buy, when the prices really bottom out…I should have listened to him…
Luckily I am in NC in an area that has had about 8% increase in values and now holding strong…
right2bright on October 21, 2009 at 3:28 PM
Can’t comment now, have to jump
Hunt035 on October 21, 2009 at 3:29 PM
After the Senate’s Medicare doctors “fix” bill failed to garner enough votes for cloture, Harry Reid is probably in the deflated camp.
ICBM on October 21, 2009 at 3:29 PM
Housing prices are racist.
jukin on October 21, 2009 at 3:30 PM
For some reason, I am expecting a large amount of suspicious house fires to sweep across the nation.
Fire Insurance companies to need the next Bail-out?
portlandon on October 21, 2009 at 3:30 PM
So why is FHA guaranteeing a trillion dollars of new mortgages with 3.5% down payments?
Ted Torgerson on October 21, 2009 at 3:30 PM
Well, since people won’t have equity in their homes, it’s a good thing that government didn’t do a program last month that put $20,000 more debt upon them by begging people to buy cars they didn’t need.
Oh wait.
lorien1973 on October 21, 2009 at 3:30 PM
Any trolls yet? OK, I’ll step in… ahem
Dropping housing prices is good news as is the rise in unemployment! What will happen is that mortgage payments will soon equal what we pay in unemployment benefits!
The recovery is well under way!
mankai on October 21, 2009 at 3:31 PM
I bought my condo in MI in August of 2006. We got the pre-opening pricing, which saved us about 5% overall in initial cost. Supposedly upgrades have gone up in price and overall this community has been well received in a pathetic economy. We had it appraised earlier this year. The price came back 6 % more than we paid at closing, and that was after the appraiser marked it down 10% overall from comparables because the economy here sucks. So I think this indicates overall that Michigan didn’t have a bubble and thus, the decline isn’t really there as much, either.
I happend to have owned property twice in CA, both times were when the markets were flat. I am probably the only person on this planet who didn’t make money while owning CA real estate. Lucky me. After I moved away each time there was a rapid increase in property values within the following year. The condo I sold in 1986 was selling at 400% of that price 2 years ago, and they are still selling for 300% more now. The place I sold in 2003 was selling for double last year, but don’t know what they are selling for now. CA real estate is a crazy market. I don’t know how that average family can really afford to live in that state. The wages are not that much higher overall.
karenhasfreedom on October 21, 2009 at 3:32 PM
Working better than expected!
jukin on October 21, 2009 at 3:33 PM
I can’t wait to see them attempt to run against Bush in 2010. People are losing the jobs, their homes, and their savings, and it’s all the fault of a man who’ll have been out of office nearly 2 years by the time of the midterms.
Doughboy on October 21, 2009 at 3:33 PM
We’re turning to selling bonds instead of cutting spending to make up for lost revenue, and we’re printing money. That means inflation. Maybe not today, but soon, and for years and years.
Chris_Balsz on October 21, 2009 at 3:34 PM
crr6 says – Success!
Bleeds Blue says – Freedom!
starfleet_moron says – Fox News Party!
Grow Fins says – I’m inspired by Mao too!
sesquipeladmoron says – Priorites!
lorien1973 on October 21, 2009 at 3:34 PM
I have to be open to moving to another state as I search for work. My plan to buy a house/duplex this year was shot to hell when I got laid off end of June. It looks like I’ll have to stay with apartment living for awhile.
aikidoka on October 21, 2009 at 3:36 PM
I guess I will be paying PMI until, about, maybe ,approximately forever.
fourdeucer on October 21, 2009 at 3:36 PM
Heh!
Baxter Greene on October 21, 2009 at 3:37 PM
obama gonna save the worlllll…
LibTired on October 21, 2009 at 3:37 PM
Nothing another bailout and a 1.4 trillion deficit in 2010 won’t fix.
lorien1973 on October 21, 2009 at 3:38 PM
WE SAVED THE ECONOMY. NOW LET US EXPAND FREDDIE AND FANNIE TO DO WHAT WE WERE DOING FOR THE LAST 20 YEAR TIMES TEN, WINGNUTZ. – Obama Administration
Good Lt on October 21, 2009 at 3:39 PM
You forgot Proud Rino…
Proud RINO – “Good News! Recoveries always drive housing prices down.”
mankai on October 21, 2009 at 3:40 PM
Actually pleased about this. Got married recently and we’re looking. Buyer’s market on the horizon.
Trent1289 on October 21, 2009 at 3:40 PM
Just picture Barney Frank running around the money printing presses, naked, as he turns up the power and slobbers….
Seven Percent Solution on October 21, 2009 at 3:40 PM
Housing prices are racist.
jukin on October 21, 2009 at 3:30 PM
heh heh heh
That’s a good one.
Sugar Land on October 21, 2009 at 3:40 PM
You forgot:
ernesto – prosperity!
Good Lt on October 21, 2009 at 3:41 PM
Sweet. Maybe my partner and I will finally be able to afford a house!
Sarjex on October 21, 2009 at 3:41 PM
Eh. Financial forecasting is about as accurate as weather forecasting.
Besides with BO’s obscene efforts to emulate Chavez, it’s not as if any of us really “own-own” our homes, is it?
anglee99 on October 21, 2009 at 3:42 PM
Taxes here in Nebraska are fixed to the NEA school levy, and you know the NEA is going to get paid. Levy will be increased to cover the NEA ‘Costs’ and won’t be lowered when the housing market comes back.
PappaMac on October 21, 2009 at 3:43 PM
Does anyone have a link that specifies which markets are predicted to fall, and by how much? When I read this article yesterday, there was no such link in it.
MarkTheGreat on October 21, 2009 at 3:43 PM
getalife –
conservatards care now about housing prices
where were they when housing prices were falling under Bush
adults in charge
LibTired on October 21, 2009 at 3:44 PM
liberal343 -
Housing prices will rise. We have the votes.
LibTired on October 21, 2009 at 3:45 PM
AnninCA-
I’m just saying that maybe housing prices need to fall 11%. That’s all I’m saying.
LibTired on October 21, 2009 at 3:46 PM
Yeah if you can get a loan. That’s the hard part. Definitely a buyer’s market though.
lorien1973 on October 21, 2009 at 3:47 PM
crr6 says – Success!
Bleeds Blue says – Freedom!
starfleet_moron says – Fox News Party!
You also forgot:
Otis B – Who cares, the real problem in America is Glenn Beck!
Norwegian on October 21, 2009 at 3:48 PM
On the other hand, the prices went way way up to fast…the only way to get people to buy homes is to bring down prices.
Terrye on October 21, 2009 at 3:50 PM
My realtor friends definitely know the deal. The foreclosures haven’t yet even hit the market.
Of course, it’s going to get worse.
AnninCA on October 21, 2009 at 3:50 PM
What???
Terrye on October 21, 2009 at 3:50 PM
If they are indeed correct, the only safe haven would be cash held in foreign currency.
Deflation + falling dollar = Disaster
Norwegian on October 21, 2009 at 3:50 PM
You don’t remember “getalife” ?
LibTired got it wrong in that he used too many words, but the sentence formation is excellent.
lorien1973 on October 21, 2009 at 3:51 PM
Longer if you have a ARM…
karl9000 on October 21, 2009 at 3:53 PM
I have a house to sell in FL and the only people looking at it are the ones that have O money to put down and are looking for the FED GOVT. to pay for it. The ones that have saved the down payment can’t get a loan from a bank. GTZ, GTZ!!!!
Frances on October 21, 2009 at 3:54 PM
The banks are still holding onto huge stockpiles of foreclosed homes.
It’s led to horrible situations in San Bernadino county outside of LA. People are now squatting in foreclosed houses, dealing drugs, etc.
Yet, if you go to buy a house?
Trust me, those same houses aren’t even available.
AnninCA on October 21, 2009 at 3:54 PM
Better hurry, interest rates are going to start climbing again any minute and then you won’t be able to afford credit.
Oh my gosh, you guys spend way too much time on the Hotair Comments section. However, these are right on the money….
Youngs98 on October 21, 2009 at 3:55 PM
Yeah. I’d try learning how the mortgage industry works. No one sits on a home. Your goal is to sell them. They aren’t eggs.
lorien1973 on October 21, 2009 at 3:57 PM
er, there are at least two of us…..
pseudonominus on October 21, 2009 at 3:58 PM
I’m glad I sold the nest this past year.
HornetSting on October 21, 2009 at 4:01 PM
Isn’t this like a preexisting condition? You should be helped to go back and have mortgage insurance pay the price down to what you should have offered when you bought the place. That way, you don’t lose any money but that is not capitalism. Suppose you just have the government pay to reduce the balance owed on your loan and subsidize your interest rate. That is not capitalism either…and stuff like that would just create other problems and our government knows it. We would go broke with that kind of program.
Wait…
IlikedAUH2O on October 21, 2009 at 4:03 PM
I cant’s believe I’m saying this but AnninCA is right. Banks that have marked houses to a make believe value on their books would definitely sit on them. They don’t want to recognize those losses. They can’t afford to.
Mike Honcho on October 21, 2009 at 4:05 PM
The banks are holding vacant homes. I have a paranoid thought, however. The banks are under orders not to sell or values are really gonna collapse. They also take an earnings hit when they settle the place out of REO.
IlikedAUH2O on October 21, 2009 at 4:06 PM
I bought my condo in MI in August of 2006. We got the pre-opening pricing, which saved us about 5% overall in initial cost. Supposedly upgrades have gone up in price and overall this community has been well received in a pathetic economy. We had it appraised earlier this year. The price came back 6 % more than we paid at closing, and that was after the appraiser marked it down 10% overall from comparables because the economy here sucks. So I think this indicates overall that Michigan didn’t have a bubble and thus, the decline isn’t really there as much, either.
–It really depends where in MI you live. The central/west side of the state with relatively good economies–like Grand Rapids and the Kalamazoo area–should be in much better condition than the eastern side of the state. I sold a house and rented for a few years in the Detroit area (in a good suburb) a few years back. Everyone thought I was nuts then. The house I rented has dropped over 33% in value (per Zillow) in the last five or six years.
Jimbo3 on October 21, 2009 at 4:09 PM
Artificially inflated home prices due to government-mandated low-interest loans to those without the means to pay them are crashing down to levels commensurate with more sound lending practices? You don’t say.
Thanks Barney! Thanks Chris! Thanks all you starry-eye leftists with your hopes and dreams in one hand and a rifle pointed in my face in the other! You get all the praise for your good intentions, and we get to pay your bills! Well done!
spmat on October 21, 2009 at 4:10 PM
I’ve heard that banks have stopped dropping a ton of foreclosed houses on the market at one time and have decided to sell them much more gradually. When they dropped a bunch on the market at once, all it did was significantly depress housing prices. Doing it more gradually could save them money, net of the holding costs, because they don’t have to drop the prices as much.
Jimbo3 on October 21, 2009 at 4:12 PM
Artificially inflated home prices due to government-mandated low-interest loans to those without the means to pay them are crashing down to levels commensurate with more sound lending practices? You don’t say.
Thanks Barney! Thanks Chris! Thanks all you starry-eye leftists with your hopes and dreams in one hand and a rifle pointed in my face in the other! You get all the praise for your good intentions, and we get to pay your bills! Well done!
–I don’t think it generally was low income people buying up the condos in Miami, Las Vegas or many other places. It was people hoping to buy and quickly sell for a profit, in most cases.
Jimbo3 on October 21, 2009 at 4:14 PM
C’mon Barney Franks. Tell me again, how it’s good for the U.S. and home owners, if we keep insisting home loans to people without jobs, or money to pay them back, is good for everybody!
capejasmine on October 21, 2009 at 4:15 PM
I cant’s believe I’m saying this but AnninCA is right. Banks that have marked houses to a make believe value on their books would definitely sit on them. They don’t want to recognize those losses. They can’t afford to.
–If the banks have already marked those prices down, they have to recognize the losses when they did so. It’s just like you have to recognize losses on your inventory if you decide your net realizable value is less than your cost to produce the inventory.
Jimbo3 on October 21, 2009 at 4:16 PM
The way the Fed works is that they make money available for banks to use for loans to customers. The problem is that the banks aren’t finding good risks to take in a deflationary economy so they aren’t lending. (Classic deflation trap.) You can worry about inflation but if you invest to protect against inflation, I think the gold market might collapse, then you will likely lose money.
IOW, don’t pile into gold right now. Dollar cost average your way into owning commodities with the idea that you will have to hold them for a decade or more to get significant returns.
Bill C on October 21, 2009 at 4:17 PM
Well, I was looking forward to retirment, and sitting outside, bouncing the grand kids on my knees. Looks like I’m gonna have to sell my knees to do that. So there goes that dream.
capejasmine on October 21, 2009 at 4:20 PM
Hey when the price of my house drops will the property tax i pay also go down? (I should keep on dreaming right.)
Greed on October 21, 2009 at 4:20 PM
While expensive condos are what get news coverage, the vast majority of in trouble loans are in poor to moderate income areas.
MarkTheGreat on October 21, 2009 at 4:21 PM
The way the Fed works is that they make money available for banks to use for loans to customers. The problem is that the banks aren’t finding good risks to take in a deflationary economy so they aren’t lending.
–Loans have started to become available to companies with good credit. There have been quite a few merger agreements announced in the last 6-8 weeks, with most of those needing bank financing.
Jimbo3 on October 21, 2009 at 4:22 PM
doesn’t matter how long they have controlled Congress, they will still pin this on W…
cmsinaz on October 21, 2009 at 4:22 PM
At least young families will be able to afford housing now, homes are vastly overpriced.
And states that managed well financially will do fine. Texas never permitted the ARMs or home equity loan industry to run rampant so there was no bubble here.
NoDonkey on October 21, 2009 at 4:22 PM
Miami, Orlando, Southern California, Las Vegas, and Phoenix, among others.
–These are all retirement areas (with the possible exception of Southern California). My guess is that quite a few of these are from “flippers” getting stuck with houses/condos they couldn’t unload. I’ll see if I can find more info. I know that people from California just went nuts in Phoenix about 5 years ago and bid up Phoenix values about 100%.
Jimbo3 on October 21, 2009 at 4:24 PM
Not really , you can have inflation in other goods that more than eats up the house price deflation.
the_nile on October 21, 2009 at 4:25 PM
I sold my house in June of 2008 because i saw the writing on the wall. I sold it at its peak price. The woman who bought it is probably kicking herself. She could have bought the same house a few months later for a lot less.
Now is NOT a buyer’s market. It will never be a buyer’s market unless you pay all in cash. If you need a mortgage, don’t buy. Interest rates will skyrocket with hyperinflation and when you mortgage comes up for renewal, you will be in the same position all those low income people were who go those ARMs.
In fact, don’t put your money in the real estate market. Get into the foreign exchange markets and make daily bets against the US dollar. That is what I do.
keep the change on October 21, 2009 at 4:25 PM
I will be living in Florida for the rest of my life. Not that there is anything wrong with that but it’s not home.
Cindy Munford on October 21, 2009 at 4:28 PM
Banks make money on the sale of the home – thru interest rates. They don’t make money by sitting on them.
Let’s walk through this…
If you have a house that is worth 200,000. You sell it over 30 years, total payments for that house are ~400,000 at 6% interest. (I’m not doing that, just approximating).
If you sell it for 150,000 instead at 6%, you make about 300,000 on it or so.
Sitting on it gets you nothing. Banks have an interest in moving houses, not sitting on them.
lorien1973 on October 21, 2009 at 4:30 PM
What loans? I know two people at my work with decent credit and stable income who can’t even get a loan for a home. The banks are being tighter than two coats of paint right now.
Yakko77 on October 21, 2009 at 4:30 PM
Wrong. They have to take the write-off if they sell.
They are sitting on property.
AnninCA on October 21, 2009 at 4:34 PM
Wrong. They are lying, which is why the stock price is holding.
AnninCA on October 21, 2009 at 4:35 PM
Next year, the Banks will have to let go of the properties they are holding.
Wait to buy. There will be true bargains galore.
AnninCA on October 21, 2009 at 4:36 PM
My condo is worth half what I bought it for. I’m only making half the payment now. Hope wells fargo doesn’t mind.
Lisa on October 21, 2009 at 4:38 PM
First, there are tens of thousands of non-performing assets (houses)that are disguised as performing assets through various accounting methods that allow banks to appear to maintain their solvency as well as report “better than expected” profits. JP Morgan Chase, Wells Fargo, Bank of America, et.al. have successfully manipulated the system while stonewalling the mark to market criteria. (In fact, they have lobbied that the MTM criteria be postponed for at least another two to three years.) With the assets being categorized as performing, they are able to maintain less in reserves. If all of their non-performaning loans were categorized as such and marked down to their actual value, they would immediately be insolvent.
Second, the Fed’s manipulation of the Mortgaged Back Securities market has artificially kept mortgage rates down. While 30-year rates are in the low 5′s, they realistically should be around 6.50%.
Finally, the whole financial industry is a house of cards.
Recommended reading for those who’d like to know more:
http://zerohedge.com
http://market-ticker.denninger.net/
singer on October 21, 2009 at 4:43 PM
You do know, don’t you, that won’t work. You’re throwing your money away. You won’t get credit for the month you send in half, but you will lose that money.
AnninCA on October 21, 2009 at 4:44 PM
Good thing I’m not planning on selling any time soon.
I guess for those with property they want to cash in on then maybe renting it out is in order until prices make selling a viable option.
OT: Gonna be away for a while. Glaucoma surgery tomorrow in my left eye. I’m already blind in the right eye due to failed retina surgeries so hopefully the doctor doesn’t sneeze.
Yakko77 on October 21, 2009 at 4:45 PM
Yup, I was in management during the S&L crisis. I can tell you EXACTLY how it’s done. *haha
AnninCA on October 21, 2009 at 4:45 PM
Good luck to you!
AnninCA on October 21, 2009 at 4:46 PM
weird use of the word “damage” – housing prices are returning to free market values because the federal government’s manipulations to boost prices have collapsed
corona on October 21, 2009 at 4:46 PM
Lorien,
I usually love your posts, but you are just plain wrong/misinformed here.
singer on October 21, 2009 at 4:50 PM
Best of luck and god speed.
Norwegian on October 21, 2009 at 4:57 PM
Depending where you live , the banks don’t wont to foreclose you even when you pay nothing because that forces them to expose the real value and that will kill their false accounting.
Check out this site http://market-ticker.org/, theres lot of info if you read up.
the_nile on October 21, 2009 at 4:59 PM
Then you know we have both false prophets and false profits!
singer on October 21, 2009 at 5:06 PM
I live on the west side of the state. I was on realtor.com earlier this week after an HGTV househunters episode that took place in Bloomfield Hills. I was shocked at how cheap the prices are over there right now, compared to even a few years ago. The east side of MI has been hammered in real estate prices, and also the unemployment over there is sky high compared to the part of the state I live in. Before this economic meltdown last year, this part of Michigan was virtually at full employment. They have lost a LOT of jobs here, forever.
And this IDIOT governor ONLY has employer incentives for manufacturing jobs. There are NO incentives for office or executive jobs created in this state. I am going to be hiring a lot of high income positions over the next year and there is zip, zero, nada incentives to bring those jobs to this state. I would not even be located here if I had not had to move back to help with an elderly mother.
karenhasfreedom on October 21, 2009 at 5:07 PM
The solution: Jewish Lightning
UltimateBob on October 21, 2009 at 5:19 PM
The east side of MI will come back in about 10 years when prices get so cheap for good houses that they scream for buyers. But the infrastructure will have crumbled in the mean time over there, I’m afraid, so it will turn out you get what you pay for.
Good luck with your mom. I think the Big 2 bankruptcies will make almost anyone reluctant to move jobs to MI for quite a while. And I think the Detroit public perception stigma will stick around for quite a while. I was recruited to the Detroit suburbs about 5 years ago and they agreed to relocate me because almost no one outside of MI would consider living in the Detroit area (even in some very nice areas) even then.
Doubt there’s a whole lot any politician can do about it for a while, Dem or GOP.
Jimbo3 on October 21, 2009 at 5:20 PM
AnninCA, I think Lisa was making a joke.
Good luck Yakko.
Loren, almost no banks (except for smaller community banks) now hold mortgage loans once they make them. The banks sell them to other institutions (who generally try to package them as financial instruments sold to investors). Banks now generally make money off of the origination and related fees upfront only and then sell the loans as quickly as possible so as not to tie up their assets.
Jimbo3 on October 21, 2009 at 5:25 PM
Yes, I know. Our company was an inch away from the Feds taking over.
We put rouge on her, propped her up, sold off anything that wasn’t nailed down, and did a reverse stock swap 5-1 that is still probably taught in business schools.
The company was bought by Euro-trash, in short.
BUT…..from the employee standpoint, thank heavens. When you’re taken over by the Feds, there is an automatic end to any severance policies.
But, yes, we were holding a commercial property portfolio that was worth zero. Zero.
There wasn’t a single property that had value.
We have not even yet gotten to peek into the commercial properties in this depression.
Trust me, when we do? Every bank in the country will be, officially, broke.
But I like to remind people, this is still paper profits/losses. Don’t lose sight of that.
AnninCA on October 21, 2009 at 5:28 PM
I hope so. You never know.
AnninCA on October 21, 2009 at 5:29 PM
Singer, the banks don’t have the houses as assets on their books. They have the loans as assets on their books (to the extent they haven’t transferred/sold them to someone else for packaging as a financial instrument).
All the FASB did was to effectively change the definition of “net realizable value” for mark to market purposes. It used to be whatever the bank could get if it dumped the loan on the market in a fire sale at the end of a quarter. It’s now the value of the loan “in an orderly sale and a more normal market.” That helps the banks considerably, but they still probably had/have to mark the loans down by 15-20%, instead of 40%. (And it may be why the banks have decided they no longer have to dump all the foreclosed houses at once but can sell them in a more leisurely process).
Jimbo3 on October 21, 2009 at 5:33 PM
Real Estate Intervention, anyone?
newton on October 21, 2009 at 5:34 PM
Interesting. And they are still full of beans.
Those properties are worthless.
AnninCA on October 21, 2009 at 5:34 PM
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