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Scuttle

By the end of 2007, prices had fallen 10% from the peak, and 8.2 million homeowners owed more on their mortgages than their homes were worth.

As of Q2 2008, prices had fallen almost 18% from the peak, and for the graph, I estimated that prices will decline about 22.5% from the peak by the end of 2008. (this seems conservative). This means about 15.4 million households will be underwater or already foreclosed on by the end of 2008.

The last two categories are based on various estimates for the price bottom (peak-to-trough). The 30% decline was suggested by Paul Krugman in December 2007: What it takes). The 35% decline is close to the "severe recession" case presented by JPMorgan last week.

Not every homeowner with negative equity will default, in fact many of these homeowners will only be underwater by a few percent. But if we estimate one half of homeowners with negative equity will eventually default, use a 50% loss severity, and a 35% price decline (23.6 million households with negative equity), and use the median house price from the Census Bureau of $216 thousand, we get $1.3 trillion in mortgage losses for lenders.

I think this is probably high (probably fewer than 50% will default), but this does give a general idea of the potential losses. If we use one third of homeowners, the mortgage losses with a 35% peak-to-trough price decline would be about $840 billion.
Posted by CalculatedRisk at 7:09 PM Comments (244)
Labels: House Prices, Negative

Systems architecting of organizations : why eagles can't swim / Eberhardt Rechtin. Rechtin, Eberhardt. Boca Raton, Fla. : CRC Press, c2000

from pdf New College News 2002
text.new.ox.ac.uk/pdfs/alumni_nc_news_nov2002.pdf

"The Hall was last tackled on this scale
when Sir Gilbert Scott put in the new roof in 1858, though a good deal
of restoration was done by Champneys in the early 1900s and more
again in the 1920s.
Myths have long accreted about the Hall. No matter how often the story
is denied, newspapers and radio journalists still insist on believing that
Scott used oak beams from trees that had been planted for the purpose
almost five hundred years before. Since most structural oak was cut from
trees of about a hundred and fifty years old, it would have been unlikely
that anyone would plant it for use in five hundred years. Happily, on this
occasion we have not needed to re-roof on such a scale, although there
were some initial fears that the lantern was unsound and insecure as well"

September 25, 2007
The oak beams of New College, Oxford
Filed under: Culture, Planning — tomwfox @ 8:33 am

by Gregory Bateson
Reprinted in The Next Whole Earth Catalog, 1980

“New College, Oxford, is of rather late foundation, hence the name. It was probably founded around the late 16th century. It has, like other colleges, a great dining hall with big oak beams across the top. These might be eighteen inched square, and twenty feet long.

“Some five to ten years ago, so I am told, a busy entomologist went up into the roof of the dining hall with a penknife and poked at the beams, and found that they were full of beetles. This was reported to the College Council, who met in some dismay, because where would they get beams of that caliber nowadays?

“One of the Junior Fellows stuck his neck out and suggested that there might be on College lands some oak. These colleges are endowed with pieces of land scattered across the country. So they called the College Forester, who of course had not been near the college itself for some years, and asked him about oaks.

“And he pulled his forelock and said, “Well sirs, we was wondering when you’d be askin’.”

“Upon further inquiry it was discovered that when the College was founded, a grove of oaks had been planted to replace the beams in the dining hall when they became beetly, because oak beams always become beetly in the end. This plan had been passed down from one Forester to the next for four hundred years. “You don’t cut them oaks. Them’s for the College Hall.”

“A nice story. That’s the way to run a culture.”

Holz Hausen Wood Pile