Two-Thirds of Lenders Nationwide Say U.S. in Midst of Real Estate Bubble

[sabra]

http://home.businesswire.com/portal/site/google/index.jsp?ndmViewId=news_view&newsId=20060404005995&newsLang=en

Two-Thirds of Lenders Nationwide Say U.S. in Midst of Real Estate Bubble - and Half Say Burst Has Begun or Will Shortly, According to Phoenix Lending Survey Results; 93 Percent of Lenders Predict Housing Prices Will Drop 10 - 20 Percent

PHILADELPHIA--(BUSINESS WIRE)--April 4, 2006--
Northeast and West Coast Likely to Be Hardest Hit, Say Lenders

Two-thirds of lenders nationwide believe a real estate bubble currently exists in the United States - and half of them believe it has already begun to burst or will burst in the next six months, according to the results of this quarter's Phoenix Management "Lending Climate in America" Survey.

A significant 93 percent of lenders surveyed expect an anticipated housing correction to result in real estate prices declining 10 to 20 percent across the country.

"In the minds of lenders, the housing bubble has moved from 'Loch Ness monster' myth status to an economic reality that could have a significant, negative impact on the lives of many Americans," said Michael E. Jacoby, Managing Director and Shareholder of Phoenix Management Services. "A year ago, 46 percent of lenders believed we were in a housing bubble. Today, that number has climbed to 66 percent - and many of them believe a correction is imminent and could lead to a drop in housing prices of up to 20 percent."

When asked when they believed the housing bubble would burst, thirty percent of lenders said it has already begun to happen. Twenty percent predicted it would occur in the next one to six months, and 27 percent thought it would happen seven to 12 months from now. Nine percent said it would occur in 2007.

Among the 92 lenders who participated in this quarter's survey, only nine percent said they did not believe a housing bubble existed.

[phantom power]

1. A bubble those same lenders helped to create.

[Gormy Cuss]

2. Yes, and they will expect a federal bailout when the losses are too high

That's my prediction.

[phantom power]

5. Probably. While their former customers are living out of their cars.

[Neil Lisst]

3. Excellent article, sabra. Thanks for posting it.

I agree with them. I've been making this same clarion call for 6 months. I saw the canary drop last fall. The real estate bubble is in trouble, and bad loans are just around the corner.

[Skidmore]

4. You mean they just noticed that they have been pumping

air into the bubble? What were they thinking? Giving multiple loans to people who could not possibly make enough money in their lifetimes to pay them off.

Predatory industries I have particular loathing for now:

pharmaceutical
finance

[Klukie]

6. The floodgates will open when this bubble bursts.

I am in no way an expert and in fact I don't know a whole hell of alot about the way the economy works, but common sense tells me that something has got to give. A large number of society has mortgages on homes with hugely inflated values. So what happens when these homes aren't worth the value anymore? Will folks just lose their equity? Anyone know what exactly is the impact for the masses? I just recently bought a home and I know it is not worth what they tell me, but I felt it was less inflated than most. I was at least smart enough to get a fixed rate, but am I in for anything else?

[SoCalDem]

7. Stay put and you'll be fine..

We have been through the cycle several times.. We've been in this house since 1981 and even with a downturn, we have plenty of equity and will ride this one out until we have to sell 5 or 6 years from now when my husband retires.. It's too big for us now, but he;s still working, and if we sold now, we would just have to pay more for something else where we are..

When he retires, we'll sell this and should have enough to pay cash for a smaller place in a cheaper state :)..probably go back to New mexico