Saturday, July 12, 2008

IndyMac Failure

We have seen the first large bank failure of the hosuing crisis - IndyMac has failed. IndyMac was once a part of Countrywide Financial, which is now a part of Bank of America. IndyMac specialized in Alt-A mortgages, or those given to people who cannot or (will not) document their income to qualify for mortgages. IndyMac had some bad loans on the books and suffered from an old-fashioned bank run after rumors circulated in the press that the bank was insolvent.

Now we have seen a major ill-effect of the housing bubble. This is just the beginning, as we will soon see a large uptick in people walking away from houses they can afford, we will see an increase in suicides and personal bankruptcies. I hope that society and the lawmakers are prepared to let the market run its course and know that while it will get worse, it will one day get better.

For the record, I don't believe we'll see an uptick in the housing market until spring 2010, and the upturn will include a stable market (no increase or decrease in prices), and will probably stay that way for 12-18 months before small positive ncreases in housing prices return. Soon I will write about the reasons I believe we will see another major housing bust in the future even though there will be no bubble before. This housing bust will likely persist for 15-20 years with some years of increases and some of decreases.

1 Comments:

At 10:41 AM , Anonymous John back pain Austin said...

"This is just the beginning, as we will soon see a large uptick in people walking away from houses they can afford, we will see an increase in suicides and personal bankruptcies."

I hope it is not true. Those with multiple accounts under $100,000 are probably screwed. During the S & L mess I had a friend with three accounts each under $100,000 that totaled $230,000. She was reimbursed a total of $100,000. Those at the S & L assured her all the money was insured. There was another S & L across the street. She lobbied Congress to no avail. after she developed cancer she ended up homeless.

 

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