Best of the Week
Most Popular
1.Bitcoin War Begins – Bitcoin Cash Rises 50% While Bitcoin Drops $1,000 In 24 Hours - Jeff_Berwick
2.Fragile Stock Market Bull in a China Shop -James_Quinn
3.Sheffield Leafy Suburbs Tree Felling's Triggering House Prices CRASH! - Nadeem_Walayat
4.Bank of England Hikes UK Interest Rates 100%, Reversing BREXIT PANIC Cut! - Nadeem_Walayat
5.Government Finances and Gold - Cautionary Tale told in Four Charts - Michael_J_Kosares
6.Gold Stocks Winter Rally - Zeal_LLC
7.The Stock Market- From Here to Infinity? - Plunger
8.Ethereum (ETH/USD) – bullish breakout of large symmetrical triangle looks to be getting closer - MarketsToday
9.Electronic Gold: The Deep State’s Corrupt Threat to Human Prosperity and Freedom - Stewart_Dougherty
10.Finally, The Fall Of The House Of Saud - Jim_Willie_CB
Last 7 days
The Precious Metals Bears' Fear of Fridays - 23rd Nov 17
UK Economic Austerity, Bloodletting and Incompetence - 23rd Nov 17
Stocks Are At The End Of The Line – Prepare Yourself Now! - 23rd Nov 17
Some Traders Hit. Some Traders Miss. Here's How to be Part of the 1st Group - 22nd Nov 17
Geopolitical Risk Highest “In Four Decades” – Global Gold Demand to Remain Robust - 22nd Nov 17
Relationship between Crude Oil Price and Oil Stocks - 22nd Nov 17
Harry Dent’s Gold Prediction Invalidated - 22nd Nov 17
Gold Sector is On a Long-term Buy Signal - 21st Nov 17
Saudi Arabia and Israeli Alliance Targets Iran - 21st Nov 17
What History Says for Gold Stocks in 2018-2019 - 21st Nov 17
US Bond Market Operation Twist by Another Name and Method? - 21st Nov 17
Learning from Money Supply of the 1980s: The Power and Irony of “MDuh” - 20th Nov 17
Trump’s Asia Strategy, Goals and Realities - 20th Nov 17
Crude Oil – General Market Link - 20th Nov 17
Bitcoin Price Blasts Through $8,000… In Zimbabwe Tops $13,500 As Mugabe Regime Crumbles - 20th Nov 17
Stock Market More Correction Ahead? - 19th Nov 17
Universal Credits Christmas Scrooge Nightmare for Weekly Pay Recipients - 18th Nov 17
Perspective on the Gold/Oil Ratio, Macro Fundamentals and a Gold Sector Bottom - 18th Nov 17
Facebook Traders: Tech Giant + Technical Analysis = Thumbs Up - 18th Nov 17
Games Betting System For NCAA Basketball Sports Betting - Know Your Betting Limits - 18th Nov 17
Universal Credit Doomsday for Tax Credits Cash ISA Savers, Here's What to Do - 18th Nov 17
Gold Mining Stocks Fundamentals Q3 2017 - 17th Nov 17
The Social Security Inflation Lag Calendar - Partial Indexing - 17th Nov 17
Mystery of Inflation and Gold - 17th Nov 17
Stock Market Ready To Pull The Rug Out From Under You! - 17th Nov 17
Crude Oil – Gold Link in November 2017 - 17th Nov 17
Play Free Online Games and Save Money Free Virtual Online Games - 17th Nov 17
Stock Market Crash Omens & Predictions: Another Day Another Lie - 16th Nov 17
Deepening Crisis In Hyper-inflationary Venezuela and Zimbabwe - 16th Nov 17
Announcing Free Trader's Workshop: Battle-Tested Tools to Boost Your Trading Confidence - 16th Nov 17
Instructions to Stop a Dispossession Home Sale and How to Purchase Astutely at Abandonment Home - 16th Nov 17
Trump’s Asia Tour: From Old Conflicts to New Prospects - 16th Nov 17
Bonds And Stocks Will Crash Together In The Next Crisis (Meanwhile, Bond Yields Are Going Up) - 16th Nov 17
A Generational Reset That Will Redistribute Wealth to the Bottom 60% Is Near - 16th Nov 17
Ethereum (ETH/USD) – bullish breakout of large symmetrical triangle looks to be getting closer - 16th Nov 17
Gold’s Long-term Analogies - 16th Nov 17

Market Oracle FREE Newsletter

Traders Workshop

US Subprime Mortgages Fallout and Declining Housing Market likely to hit the Stock Market

Housing-Market / Analysis & Strategy Feb 27, 2007 - 12:55 AM GMT

By: Nadeem_Walayat

Housing-Market

The continuing fallout from subprime mortgages is starting to weigh on the Stock Market as the consequences of failures continue to ripple out into the financial and home building market sectors. Already sharp sell offs have occurred in the shares of subprime lenders such as New Century Financial Corp, falling by more than 40% in less than a week. As well as major banks such as HSBC issuing statements on the impact of defaults.

US Subprime Mortgages fallout and Declining Housing Market likely to hit the Stock Market


The market has yet to fully realise the size and extent of the impact of more than a trillion dollars of subprime mortgage debt at risk of default, especially as the US housing market continues to tumble lower which is forcing more subprime mortgage holders into negative equity, and foreclosure. The subprime sector is now well on the path to a crash, the only question is when will it take the rest of the Stock Market and the economy down with it.

Over 20% of mortgages are of the subprime category with the expectation that as many as 25% of these loans are likely to end in foreclosure in the face of further falls in the housing market. This could significantly worsen the situation if further rises in interest rates were forced onto the Federal Reserve, to curb inflationary pressures brought about by a falling dollar due to the twin deficits, exacerbated by the recent switch to negative investment flows.

Crude oil is showing all the signs of re-igniting its bull market, having made a bottom in mid January. Should crude oil rally back to above $70 then worries will again shift to inflation and rate rises.

The main beneficiary of the subprime fallout is the bond market, which has already staged a rally from lows set in late January, this despite a weakening US Dollar on expectations that the falling housing market and expectations of defaults levels of up to 25% could tip the US into recession later by the end of 2007. These fears were earlier discussed on Monday by former Fed Chairman, Alan Greenspan who in answering a question on the US economy stated " it was possible that it would go into recession by the last few months of 2007".

By Nadeem Walayat

(c) MarketOracle.co.uk 2007


© 2005-2017 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife