- The US Government owns or guarantees 90% of all new mortgages written in the past year.
- The US Government now guarantees half of all mortgages of Fannie and Freddie.
- declining values
- underwater mortgages
- evaporating home equity
Consumer debt is $14.5 trillion, or 134% of disposable personal income. Much of which, it should be noted, is devoted to debt service. Translation: consumer is tapped out.
9.6% of mortgages in the U.S. are in default. 50 million mortgages = 5 million in default.
Home equity has fallen from $13 trillion in 2006 to $8 trillion today. Home equity is now less than mortgage debt, and highly vulnerable to further reductions in valuation. Mortgages + equity= $18 trillion. A further 20% decline in home prices would be $-3.6 trillion, dropping home equity of the entire nation to less than $5 trillion.
About 25 million homes are owned free and clear. That remains the one bit of light in this darkening picture. Not everyone mortgaged their home to the hilt and squandered the proceeds.
40% of the home sales in 2005-6 were openly speculative. Add in fraud, lies and half-truths (Uh sure, I'm gonna live here as my primary residence, heh), and you get 50% of all sales in the bubble years were entirely speculative.
There are some 18 million empty dwellings in the U.S. right now. Maybe 4 million qualify as true "second homes" for the upper classes; the rest are, well, just empty.
Fannie and Freddie floated $5.4 trillion in mortgages off of assets of $114 billion. So leverage of 50-to-1 is just normal business practice now. Or could that have had something to do with their demise?
Guess what FHA's leverage is: 50-to-1. Yes, FHA's "reserve" is 2% of its portfolio--and losses are driving that toward zero.
U.S. households have lost $5 trillion in home equity, $2 trillion in retirement accounts and $8 trillion in the stock market. Depending on how you add it all up, that comes to a loss of about a third of all household wealth in the past few years.