‘Signs Of Market Adjustments’ In Florida
The Florida realtors have the July numbers out. “Florida’s housing sector continued to show signs of market adjustments in July as mortgage rates edged up and the inventory of homes available for sale remained at higher levels in many markets. A total of 14,451 existing single-family homes sold statewide last month, a decrease of 33 percent from the 21,691 homes sold during the previous July, according to FAR.”
“Sales of existing condos also decreased in July, with a total of 4,260 condos sold statewide compared to 6,739 in July 2005 for a 37 percent decrease.”
“The housing slowdown continues in South Florida as the median price of an existing single-family home in Broward County fell 1 percent in July compared to the same month last year. Sales across the region continued to plummet, especially in Palm Beach County, where sales were off 44 percent compared to last July.”
“In Miami-Dade County, the slowdown in condo sales narrowed in July. Sales were off just 12 percent, but the median price fell 11 percent to $252,000.”
The Herald Tribune. “Realtors in the Sarasota-Bradenton area sold 49 percent fewer homes in July than they did a year ago, and the median price on the homes they did sell declined 11 percent. The Port Charlotte-Punta Gorda market was nearly as dismal. July closings declined 37 percent to 236 from the 374 of a year ago. The median price of a Charlotte County home fell 4 percent from a year ago to $228,300 from $236,600.”
The Naples News. “Realtor-assisted single-family home sales in Collier County slumped 51 percent last month compared to July 2005. The median price dropped 6 percent in the year. Home sales in Lee County dropped 32 percent, from 1,026 in July last year to 694 last month. The median price dropped 8 percent. Condo sales in Lee County dropped 50 percent, from 356 to 179, although prices increased 35 percent, from $256,700 to $346,300.”
The Orlando Sentinel. “Toll Brothers Inc. said Tuesday that its third-quarter profits fell by 19 percent as the housing-market malaise weighed on sales and caused the luxury home builder to abandon some locations. CEO Robert Toll told analysts during a conference call that he doesn’t yet see signs of improvement nationwide.”
“‘I don’t see a turnaround in any of the markets,’ he said. ‘I don’t see any forming a bottom.’”
“The housing market has been getting weaker faster than expected, said Alex Barron, senior housing analyst with JMP Securities. Toll Brothers’ vulnerability is its luxury niche. ‘What’s hurting Toll is just the fact that they build luxury homes. Luxury homes are very discretionary,’ he said. ‘People who want to live on the golf course, they can do so today or they can wait a year. There’s no hurry.’”
“Barron said Toll Brothers’ strategy of not cutting prices hurt its sales, since many builders are doing it. Over the weekend for example, Lennar Corp. slashed prices of homes in a Florida community. One 3,900-square-foot house was selling for $560,000 down from $768,000, a savings of $208,000.”
The city details are in tables at the bottom of the first link. More related info:
‘Larson, of the Jupiter based financial analysis firm, said investors need to sort out the facts from the headlines and calmly evaluate their strategies to avoid making rookie mistakes. ‘The wrong move now could cause needless hits to family savings or the loss of a retirement nest egg,’ he said, noting housing inventories are at their highest level in history and sales are falling.’
‘ Larson said homeowners who have to sell shouldn’t chase the market down and let their listing get stale. ‘Incremental price reductions will not be helpful in a down market,’ he explained. ‘It’s better to attract the maximum number of potential buyers right at the outset by pricing your property at a very competitive price.’
‘The Jacksonville metropolitan statistical area continues to be ranked high in housing, despite the recent “doom and gloom media reports” to the contrary, according to Mark Carlson, mortgage banker and branch manger of Wells Fargo Home Mortgage.’
‘What we’re seeing in other areas in the state — where there was a large amount of condo construction and high volume of investors flooding the market and there’s a ton of inventory — is not healthy for the new construction market,’ said Davis, who is also City Council vice president. ‘In Jacksonville our numbers are much better as far as inventory and investors that are backing out of the market. The quality of life here, the availability of housing and the jobs we are creating are bar none. We are insulated from all the other problems that you might see across the nation and across the state where they’re relying on one industry, or they don’t have the natural resources that we have that attract homebuyers.’
“It’s different Here !”
Oh, really?/??
What all this cheerleaders seems to overlook is that this market is based on speculation, not fundimentals, i.e., it really doesn’t matter what your local job market looks like, or what’s special about your particular town. Quality of life …in Jacksonville ?
Pleeeeze…..!!!
That’s right, don’t bother with the foreplay just get those trousers down and bend over immediately. Best just to get it over with! Man, this ball is rolling downhill FAST!
There is a ton of tract housing and condos going up all over Jax. In one 6square-block of Jax Beach alone I count about 1000 new units in various stages of construction. People are still in denial here. My landlord said you can still get your price, you just have to wait longer now. “Before you would have it sold in four or five days, now it might take 60-90 days. Huh? Nothing is selling, except some SFHs in nice, established areas of the city. Sure, Jax is not going to get killed as bad as some areas in Florida and elsewhere, but it’s still going to be brutal.
“During recessions money is returned to its rightful owners.”
Yes, I’m seeing a little bit of RED in this report, but there should be more. Stop by and discuss our bubble down in the Sunshine State….
Florida - Paradise Lost
“‘I don’t see a turnaround in any of the markets,’ he said. ‘I don’t see any forming a bottom.’”
Nor should you expect to any time soon.
True, but at least he’s admitting it. Dumping $40 million of your own stock at the peak allows a degree of honesty that the Koolaid drinkers at NAR can’t participate in.
Good thing they didn’t post date his stock options. Nice to know the shareholders bough all of his stock through company announced buybacks. The PPT hard at work keeping this pig afloat.
An explaination please:
Miami
A house not on the water sold in Feb. for $1.7. Now they are now trying to rent it for $4500/month. They could have bought a waterfront canal home, one block away, of similar size for $1.9. A rental on the water is $3500/month.
What am I missing?
The alligator is getting hungry
The Florida alligator population must really be exploding.
‘ Larson said homeowners who have to sell shouldn’t chase the market down and let their listing get stale. ‘Incremental price reductions will not be helpful in a down market,’ he explained. ‘It’s better to attract the maximum number of potential buyers right at the outset by pricing your property at a very competitive price.’
Listen to this advice sellers. The only listings getting any attention in our area now are the homes listed 10% under comparable listings. When I say comparable listings, I mean the home that have been listed for 60 days or less, not the ones listed last Spring that have just sat there at the same price. Sorry for the bad news, but to sell your home right now with any other notion is simply a waste of time.
That’s great advice, but what do you tell the poor sap who spent all his home equity, and now is faced with the choice between listing at a price above market at which his home will never sell, and dropping the price to where it will sell, but where he cannot cover his accumulation of home-equity-wealth-effect debt?
Ummm…you’re screwed?
How about: “You’re already bankrupt, and just haven’t noticed yet”?
In my best sixth-sense voice: I see bankupt people.
You tell him to go borrow some money so I can bring a check to the closing.
HAHAHAHA - Great answers, all.
Schaudenfraude, indeed. :^)
i’ve only seen one good set of photos showing florida high rise construction. these are bldgs that will be flooding the market in coming months. i’ve driven through dtsd and seen the actual buildings. there is no comparison. the florida mess looks 10x the sd mess.
is this just my imagination, or is there a 25 year supply of condos descending on miami & co?
Could be as much as 50 years depending on whose numbers you use. From what I here, about 70% are in the hands of speculators. Florida is going to be a complete catastrophe when it is all said and done.
1926 anyone?
Nah, it’s going to drop to 1 or 2 years after the next Cat3/4/5.
I’ve never been to SD, but I spend a lot of time in S. Florida. WAY over-built. I’ve also been paying attention to the prices over the past ten years, WAY over-priced, and not only that, there’s actually tons of land there. Whole undeveloped neighborhoods. East of Naples and west and east of Ft. Myers, grids of mostly unfinished roads that represent about 50 years worth of development if not longer than that.
I lived in Melbourne, FL in the early 80’s and saw the same thing in the next town, Palm Bay. They built fully paved roads for a huge development in the 1960’s or 70’s and when NASA scaled back, the development stopped. I understand the land was sold and they finished building within the past ten years, but when I lived there it was a ghost town. I know a guy that landed a private plane on one of the roads for kicks.
Rich but stupid Europeans and South Americans will save Florida as people spin it. Umm explain this to me, Rich and Stupid? Most people who are Rich are probably smart.
What will hurt them more than anything is they are running out of stupid people. Most have already been sold homes!
aka drug lords and slave traders !
No, you are correct. I was in Miami Beach the past 2 days.
Lots of traffic, lots of buildings, lots of for sale signs.
‘The Jacksonville metropolitan statistical area continues to be ranked high in housing, despite the recent “doom and gloom media reports” to the contrary, according to Mark Carlson, mortgage banker and branch manger of Wells Fargo Home Mortgage.’
This article is a complete joke. The latest numbers show a 10-1/2 month supply of homes for sale in the Jacksonville Area with a record number on the MLS (aproximately 5 times last years number). Condo sales are down 50% with negative YOY prices and home sales are down 17%. How is Jacksonville not in the bubble?
It’s sad that this is the kind of article our local media continues to push. I’m sure the Times Union will have plenty of articles next week about how Jacksonville is a real estate goldmine.
The media’s idea of an objective story on the housing market is to interview the head of the local RE association and then reprint what they say. The paper in Boise does this and they end up with some very misleading or incorrect information packaged as “news”.
Nobody’s immune. Although I am not familiar with Jacksonsville like I am with the Miami, Orlando and Tampa areas, it does seem sometimes that Jax is a little more stable than other metro areas in Florida. It might just be my perception. One thing I do notice, though, if you look at lower end HUD and other foreclosures in Florida, Jax always seems to have more than any other area, with or without a bubble. However, the middle and upper end seems to be more consistent.
That’s because Jacksonville (and the rest of N. Florida) is much more blue collar than the rest of the state. RE trends also move South to North in Florida. The Jacksonville numbers somewhat mimic the Orlando numbers from last month and S. Florida from a few months ago.
“Barron said Toll Brothers’ strategy of not cutting prices hurt its sales, since many builders are doing it. Over the weekend for example, Lennar Corp. slashed prices of homes in a Florida community. One 3,900-square-foot house was selling for $560,000 down from $768,000 — a savings of $208,000.”
Toll conundrum: Keep prices where they have been and lose all your prospective buyers to competitors willing to undercut to the tune of $200K. Drop your prices and worry your customers that they might accidently catch themselves a falling knife.
A savings of $208,000, and yet ironically still a waste of $560,000. How odd. How can the two conditions exist at the same time? LOL
“…a savings of $208,000.”…or a loss of $208k if you bought that model for $768k and closed before this past weekend.
Old article here, but wanted to mention some of the jaw dropping statistics from last years booming times…
http://www.sptimes.com/2005/06/06/Columns/New_rage_in_mortgages.shtml
Some of the more jaw dropping stats and comments quoted below:
“So alluring are interest-only loans, they now make up close to 20 percent of mortgages loaned nationwide and in the Tampa Bay area. Just four years ago, these loans made up less than 2 percent of the mortgage market, according to LoanPerformance Inc. of San Francisco.”
“In other parts of Florida, the boom in interest-only mortgages is even more intense. In Fort Lauderdale, a third of home buyers used interest-only mortgages last year, while 6.7 percent used them in 2001. In Panama City, 60 percent of home buyers chose interest-only loans in 2004, up from just 5 percent in 2001.
And in what may be Florida’s most speculative area for real estate investing - Fort Walton Beach, located between Pensacola and Panama City - 71 percent of mortgage borrowers tapped interest-only loans in 2004. In 2001, only 1.9 percent chose them.
That’s the highest percentage of interest-only loans in any market nationwide tracked by LoanPerformance.”
“Interest-only mortgages were the standard mortgage in the 1920s, but they disappeared during the Great Depression, and for good reason,” Guttentag wrote last month on Bankrate.com.
ot but good reading. despite cramer. even he is bearish
http://immobilienblasen.blogspot.com/2006/08/360-degrees-of-homebuilder-cramer.html
Summer 2005 Cramer said to BUY TOL and other hombuilders and so did that moron Kudlow! These guys blow with the wind.
he is flip flopping every ten minutes. he is really a clown. kudlow is one of the worts.
said it befor. i´ve stooped watching cnbc,bloomberg and other financial tv since the beginning of the year.
http://www.immobilienblasen.blogspot.com/
http://www.immobilienblasen.blogspot.com/
“Interest-only mortgages were the standard mortgage in the 1920s
And we all know what happened after the 1920s, right?
I had thought that back in the ‘old days’ that 50% down was the standard, and that the 20%-down-30-year mortgage didn’t really come into being until after WWII. Anybody know the history? Suddenly seems kinda relevant.
Question for you folks.
1. Who is still buying homes? Are they desperate? Are they unaware?
2. In your social circle, do you know of anyone who has bought a home in 2006?
3. In your social circle, how many people do you know that are renting instead of buying?
My answers:
1. I have no clue who is buying now.
2. I know of no one in my immediate circle that has bought a home in 2006.
3. I have at least 3 other couple-friends that are now renting — wating for the 50% drop in SoCal.
people will always buy, even in a down market. people get married, etc. some people always want to own and never want to rent.
my in-laws bought their current home at the peak in 1989 because they wanted a house. People look at the market and if they see a home they can afford and like then they buy it. in my case the inlaws bought their home at a 4 to 1 price to income ratio.
1. My wife’s cousin in Detroit bought a house last month. I’m going to see him over Labor Day and I’m definately not going to bring up RE. He bought the house because he just got his first good job and was really excited about having some money coming in. I think it was a really huge mistake, but I don’t want to hurt his feelings. When he brings up his new house I’m just going to congratulate him.
2. None of our friends have purchased a home in 2006.
3. We are the only couple in our group of friends that is renting. The rest bought their homes before the run up and don’t plan on leaving.
My sister is trying to buy, she has her mind made up she wants a house and she won’t listen to reason about waiting. I sent her the link to the WSJ article but I doubt that will help either.
M yyounger brother finally unloaded his townhouse in the Northern Virginia outer suburbs. The buyers were four Hispanics with four different last names. They didn’t speak English. He paid the closing costs, the loan was 100% financing.
1. Believe it not people are still largely unaware of exactly what’s happening.
2. One of my best friends just closed on a house on Long Island. She decided she wanted a house last year and continued working towards it and it seems that her forward momentum did not allowed her to change her mind and wait.
3. I know two other people who are planning to buy. I have come to realize that information trickles down to lower incomes and less educated neighborhood at a much slower pace.
Actually I bought one - just recently. I’m kind of a special case though in many ways -
- I’m one that *really* prefers to own vs. rent, for many reasons, including that I like to do improvements.
- Just relocated from CA to the east, for family reasons. I suspect many current buyers are in this boat, including a couple of others who have recently bought in my neighborhood. I sold a home in CA which made a very large gain (bought it in 2000).
- I put a very large down payment, way above 20%, with a 30-year loan. Also my finances are such that I could afford to lose a large portion of my home “equity” to be lost. I fully expect a large drop - anywhere from 20% to 50% probably.
- I have no plans to sell anytime soon, will probably be in my house for at least 10-15 years and maybe a lot more. I would imagine that by the time I do go to sell that prices will probably be back up some, though it wouldn’t be the end of the world for me if they aren’t.
So there are buyers out there. Just a lot less than there used to be. I think there are some like me that are still willing to buy even knowing the conditions, but a lot I’m are sure are still the “greatest fools” that think that the downturn is temporary or aren’t even aware of it.
Some people don’t have a clue. We really are hitting the endgame here with multi-generational mortages in the UK and athletes getting in the game. I follow hockey…… I noted that Mats Sundin purchases a high end house in Toronto for speculation during the strike. The other day I read about the Rangers goal tender Henrik Lundkvist returning to NYC early so that he could purchase housing in Manhattan. I am guessing that he has a new contract after his stellar first season. He commented that it was very expensive but also “an excellent investment”. Uh-huh.
I also recall that another Swedish goal tender retired (early) or returned to Sweden during the height of the dotcom bubble. Apparently he became more interested in speculating in stocks than playing hockey. I wonder how it turned out for him….
‘Existing single-family home sales on the Treasure Coast were down 39 percent from levels of a year earlier, according to a report released Wednesday. The median sales price of an existing single-family home in the Fort Pierce-Port St. Lucie Metropolitan Statistical Area, which includes Stuart, was at $259,000 in July, compared to the $265,300 in the same period last year. Realtors sold 400 units in July, a decrease from the 654 sold during the same period last year.’
‘The downward trend is also evident in the local condominium market. The association said sales of condos in the region decreased 37 percent in July. The median price was $188,300, up slightly from the $180,900 during the same period last year.’
‘In the Indian River County region, Realtors sold 151 existing single-family homes in July, 50 units less than the 201 sold during the same period last year. The median price significantly dropped $41,500 to $237,500, compared to the $279,000 in July 2005. As for condos in Indian River County, 28 units were sold last month compared to 62 units in the prior year. The median price dropped to $160,950, a staggering $123,550 decrease from the $284,500 in July 2005.’
Good Article Ben, but I’m sure the bagholders would retort, “But Hey! My condo is worth more money now because prices keep going up!”
yeah, the median went up but the comps went DOWN the toilet.
- Florida Re- Lie -tor said;
‘the median price of an existing single-family home in Broward County fell 1 percent in July compared to the same month last year’.
- Broward County, obviously the worst is behind you now.
Those who don’t study the past are doomed to repeat it. I’ve posted it before, but here is a nice background on the 1920s crash:
http://www.stock-market-crash.net/florida.htm
The parallels are frightening.
Are the FISBO’s part of these stats???
Looking around here in Florida I estimate at least 1 in 5 to be a FISBO. So add about 20% to the inventory if they aren’t included in the “official” numbers.
Do any of you live in West Palm Beach? I wanted to know the market status there? Thanks.
I live near WPB and it’s everything you’ve read about here and more.
For fun we’ve gone to some open houses lately and what struck me most is how uneven the market is. You’ll find a 400K asking price for a POS in a lousy neighborhood or for a pretty nice house in a good neighborhood 2 miles away. Sellers seem confused and desperation is often palpable. We were always the only ones there and agents jumped us like flies would a dog, still yelling at us from the front door as we’re getting in our car, repeating that seller is motivated and willing to negotiate.
I live in West Palm Beach. It is getting ugly fast. “For Sale” signs everywhere. Sales have fallen off a cliff and we probably have 19 months worth of inventory with many condo towers, subdivisions, and condo-conversions being added. Median price peaked at $421,500 and is currently $390,500 which is 7.4% off the peak. Been flat YOY since June I believe. Condos are still up (probably double digits) due to the last minute speculative frenzy last spring/summer. Contrary to popular belief, the common citizen here doesn’t make much money. Home prices need to be cut by 50% to get us back to any sense of normalcy. People are still in denial, but not as many as 6 months ago. Those with goofy mortgages, those who bought on spec and those who bled their “equity” dry are toast. Forclosures are climbing higher than a Korean missle and will only get worse as the ARMs keep resetting. I wouldn’t consider buying until 2009-2010.
‘The founder of Motor Werks of Barrington Paul Tamraz says the suburban Chicago contingent in Naples, Fla., is obvious. ‘I call it Barrington south,’ said Tamraz. Home sales have slowed by double digits and homes are staying on the market longer, according to Jo Carter, president of the Naples Area Board of Realtors. Susan Camiliere of Roselle bought a condominium last year in Naples, intending to ‘flip it,’ meaning to sell soon after buying. A Realtor with RE/MAX Central, she has flipped Naples properties in the past.’
But this time she reconsidered, deciding instead to rent the place. ‘There is just so much (inventory) on the market right now,’ she said. ‘I’m waiting for the market to come back.’
‘Wilber said the Chicago connection remains strong and her Chicago-area ties have helped her sell homes. ‘Sometimes it helps to mention you’re from Chicago,’ she said. ‘A lot of the business I get comes from Realtors I knew in Chicago. It helps.’
Yea, I wonder if the same sorry folks who saw hundred dollar increase every time they walked down their driveways like the $1000 (per zillow) decreases.
Paid 300k asking 500k.
14526 BROADHAVEN BLVD, Orlando, FL 32828
The bursting of the U.S. housing bubble spells Recession
by Dean Baker, co-director of the Center for Economic and Policy Research
http://english.hani.co.kr/arti/english_edition/e_editorial/150951.html
The evidence is mounting that the U.S. housing boom is turning into a bust. In the last week, the National Association of Realtors released data showing that house sale prices are down from last year’s levels in 26 major metropolitan areas; the Commerce Department reported that housing prices are down by more than 15 percent from their bubble peaks; and the Mortgage Bankers Association reported that applications for home purchase mortgages have dropped by more than 20 percent from their levels one year ago.
The end of the housing boom is likely to lead to the end of U.S. economic recovery. The housing sector has been hugely important to the U.S. economy since the last recession. The unprecedented run up in house prices led to a record boom in housing construction and sales. In 2005, new home construction was nearly 50 percent higher than its level a decade earlier, even though population had risen by just 10 percent. Sales of existing homes in 2005 were nearly twice the 1995 rate. The surge in both construction and sales led a boom in employment in these sectors, which together account for almost 5 million jobs.
In the last decade, house prices suddenly exploded, increasing by more than 50 percent, after adjusting for inflation. This created more than $5 trillion in housing bubble wealth.
Consumers have borrowed against this new wealth at a feverish pace, pulling more than $600 billion out of their homes in the last year. This borrowing fueled the consumption boom of the last five years, pushing the savings rate into negative territory for the first time since the beginning of the depression in the 1930s.
Of course, just like the stock bubble, the housing bubble was not sustainable. The stock bubble collapsed because the supply of new issues of tech stocks eventually exceeded the demand from speculators. Similarly, the record levels of housing construction inevitably led to a glut of housing on the market.
In addition, the borrowing spree of the last five years is likely to come to an abrupt end as stagnant or declining home prices cut off this important source of credit. There is evidence that we are already seeing the effects of this credit squeeze, as credit card debt has begun to soar in the last few months. Families who can’t get the money they need by borrowing against their homes will turn to credit cards as the best available alternative.
All of this is very bad news for the U.S. economy. If housing construction and sales fall back to trend levels, it would mean a loss of more than 2 million jobs. The decline in consumption that will result because people can no longer borrow against their homes will have an even more dramatic impact on the economy. The financial system will also be shaken by an unprecedented wave of mortgage defaults, as millions of people will face difficulty in sustaining their mortgage payments.
There is no obvious way to prevent the collapse of the housing bubble from leading to full-fledged recession, and quite likely a severe recession. It was an enormous mistake for the United States to allow a housing bubble to grow to such dangerous proportions. It is unfortunate that the Federal Reserve Board and others in policy making positions ignored warnings when this crisis still could have been averted.
So which is going to cause more overall financial losses- all the hurricanes that have hit Florida in the ‘04 and ‘05, or the slow-motion real estate crash that’s now occurring?
The hurricanes did 2 things:
1. Lowered demand - freaked people in state to move out, freaked out of staters from moving in.
2. Increased Insurance - state welfare insurance company (Citizen’s Insurance) now #1 insurer in the state. Many people are getting increases of 100+% on rates this year, and that’s after the same in 2004. Those who bought year’s ago are having problems affording policies.
Florida - Paradise Lost
While FAR doesnt have the number for July on their website they do have June…
Example:
June of 2006 $326,400 which include the Bradenton/Manatee #’s
July of 2006 $302,100 which doesnt include the Bradenton/Manatee #’s
In one month a 24,300 haircut to the median?!?…. Even with the Manatee numbers I think it would similar…
For those claiming that Labor Day would be a day of reckoning I beleive them to be correct
Labor Day is not our “day of reckoning”, since school started 2 weeks ago. We should see some very interesting August numbers!
1) i bought one, but its in houston so 150k for an immaculate 2000ft2 house w/good schools, etc… i expect it will be worth ~125k in 2-3 years and probably not break even until about year 5 or 6, but i dont give a crap, its not an investment and i’m not planning on selling for a long long time. monthly costs are about equal to renting a similar place.
2) lots, but again this is houston so i dont think prices will plummet, just stagnate forever.
3) none
jrm
you may well be the first poster to distinguish between a house and a home.
salude.
I bought a McMansion on long Island in 2003 for 2 M all cash. My neighbour sold in 2005 Aug for 2.75 M. Thanks to this blog I did not invest the rest of my money in real estate. I know I overpaid but I can sustain it and even if prices correct to 2001 i dont care but this is just to tell you what sposal pressure can do
Sorry I meant Spousal Pressure. The wife wanted the social staus real bad and I had the money so I shut her up.
DJ, where did you get $2M cash? Say Buddy can you spare a dime?
Just a thought that I have been pondering. What if this credit bubble continued because the more I thought about it the more I am not sure if the rest of the world can afford to let the US fall into a depression. That will sink the entire world economy. I wont cite any statistics since i don’t have any but anecdotally aren’t Americans the majority of the consumers of most goods produced in the world? I can sort of imagined that similiar to a functional drug addict / drug dealer relationship. In the beginning, the drug addict pays and pays but at some point he asks the dealer to lend him some. eventually the debt is so great that if the dealer cut him off, a significant source of business for the dealer is gone. At this point will the dealer forgives some of the debt so that the addict will still be there or risked having the addict go cold turkey; whether he dies or sobers up, the dealer loses. In a way, the MBS holders may have to swallow some bitter pills and let the FBs off the hook by restructuring the loans or risked having an asset that can’t be utilized constructively. Also borderless corporations may find that it behooved them to assist in the bailout via pressure on the MBS holders (or their governments) as a failed US economy (based on consumtption) will reduced demands for all products across the board. This create a positive feedback loop which further deterioate the production side of the equation until equilibrium is reached. At that point the world economy may have contracted enough that stimilus(i) may take decades or generations to rebuild the world economy. I think, in my humble opinions, that with such chances for systemic failure, there will be pressure apply on the wrong people (MBS holders) and the FBs will be saved (somewhat). Again this is worthless opinion from a rambling fool.