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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

1. Pro 1 kW heat = 0.4 - 0.9 m³ storage space - depending on the house Dämmzustand
(inkl. Leerraum) (including space)
2. Nutzbarer Lagerraum = 2/3 Lagerraum (inkl. Leerraum) Effective storage space = 2 / 3 storage space (including space)
3. 1 mł Pelletsmenge = 650 kg 1 m³ pellets quantity = 650 kg
4. Energieinhalt = ca. 5 kWh / kg = Energy content of about 5 kWh / kg

Beispiel: Example:

Einfamilienhaus mit einer Heizlast von 15 kW Single with a heat load of 15 kW


= =


5.800 kg Pellets Jahresbedarf 5,800 kg pellets annual requirement

15 kW Heizlast x 0,9 mł / kW 15 kW heat x 0.9 m³ / kW


= =


13,5 mł Lagerraumvolumen (inkl. Leerraum) 13.5 m³ volume storage space (including space)

Nutzbarer Rauminhalt Effective capacity


= =


13,5 mł x 2/3 = 9 mł 13.5 m³ x 2 / 3 = 9 m³

Lagerraumgröße Storage room size


= =


13,5 mł : 2,4 m (Raumhöhe) = 5,6 m˛ Lagerraumfläche 13.5 m³: 2.4 m (room height) = 5.6 m ˛ storage space
(2,0 x 3,0 Meter sollte jedoch nicht unterschritten werden) (2.0 x 3.0 metres should not fall below)

Gelagerte Energiemenge Stored amount of energy


= =


5850 kg x 5 kWh / kg = 29250 kWh 5850 kg x 5 kWh / kg = 29250 kWh
(entspricht einer Heizölmenge von ca. 3000 Liter) (equivalent to a quantity of fuel oil about 3000 liters)

One of those carpenters is Paul Tyma, the author of Talkinator.

I have written about Paul before in his role as author of Mailinator, another novel web service. That column is among this week's links. Mailinator is an e-mail system that requires no sign-up. The idea is brilliant: if you don't want people to know your real e-mail address, just make up a mailinator address (stinkyface@mailinator.com, for example). Mailinator addresses are useful to give when you don't want to be data-mined and bombarded with offers as the world discovers you are interested in pre-Columbian art or original pictures of Betty Page. Anyone can check messages for stinkyface, but most Mailinator mail is never read because it is spam. The business model here is both simple and modest: show ads to the one percent of Mailinator users who actually DO check their mail.

In order to make money with this business model you need a LOT of traffic, which Mailinator fortunately gets. According to Paul, the Mailinator server receives about 12-15 million messages or 28 gigabytes of mail per day, 99 percent of which is never read. The one percent that IS read means there are at any moment about 150 active users on mailinator.com. The volume of mail coming in has hit as high as 2,000 messages per second.

There is an important lesson in Web 2.0 economics here. Mailinator runs on ONE server. That server is in a rack at Serverbeach and would cost under $100 per month if Paul actually paid for it. But by running a link for Serverbeach on the Mailinator page, Paul gets free service whenever one of his users becomes a Serverbeach customer through that link. His traffic volume is so high that the referrals mean he will never pay a cent for that Mailinator server. So the server is free, the traffic volume is HUGE, and even with that one percent duty cycle the site makes good money from AdSense ads alone.

So why aren't there more Mailinator competitors? There are plenty, but they come and go. The reaso

Diesel propulsion vs. electric power

The Sprinter system's DMU railcars (see photo, below) are manufactured by the German carbuilder Siemens Transportation Systems. Each car is propelled by two 440-horsepower Mercedes diesel engines beneath the floor of the passenger cabin. The maximum permissible speed of the trains is 55 mph. Each car seats 136, with room for 90 standing passengers; and on most trips, the transit district plans to couple two cars together. Through multiple-unit controls, the driver has control of all four diesel engines in a 2-car train. The car body is made of aluminum integral construction; the empty weight is 67 tons. Every car has three different braking systems. When running below 15 mph, the vehicle uses the regular wheel brakes (air brakes). When the train is moving above 15 mph, the cars are slowed by an engine retarder, not by the regular brakes. The third braking system is an electromagnetic track brake (using three electromagnets) located in the trucks (bogeys). When the train goes into emergency braking, all brake systems are applied at once. The initial fleet consists of twelve vehicles provided by Siemens at a cost of $52.2 million. ...
...actual capital investment costs for the project, pushed higher by inflation, delays, and unexpected problems, reached $484.2 million. Operating costs are projected at about $11 million per year. ..
In 1987, the project was included in TransNet, the countywide 0.5% sales tax for transportation projects. In 1990, the NCTD board of directors voted to build the line between Oceanside and Escondido. At that time, the project was projected to cost $60 million and begin operation in 1999. In 1991, the plans were revised to include a new stretch of track, a 1.7-mile double-track alignment to California State University San Marcos, for an additional $25 million. And in 1992, as already mentioned, the existing railway line was purchased. ....
it is questionable whether DMUs – despite eliminating the e

By Katherine Burton and Jenny Strasburg

July 30 (Bloomberg) -- Citadel Investment Group LLC took over Sowood Capital Management LP's credit holdings after the Boston-based hedge-fund manager suffered losses on corporate bonds and loans. Terms weren't disclosed.

Sowood, which manages $3 billion, said July 27 that returns fell as investors fled riskier debt such as subprime-mortgages and bonds used to fund leveraged buyouts. The risk of owning corporate bonds soared today to the highest on record in the U.S. and Europe, credit-default swaps show.
Harvard's $30 billion endowment, the largest for a university, was to increase its allocation to Sowood's hedge fund and a separate private-equity fund this year, according to a December statement from Sowood. The private-equity fund was spun off this month as Boston-based Denham Capital Management LP.

John Longbrake, a university spokesman, declined to comment. Mohamed El-Erian, CEO of Harvard Management, didn't immediately return phone calls.

Seeking Higher Returns

El-Erian said in the December statement that splitting the hedge-fund and private-equity businesses would boost returns for both. The Harvard fund was the sole initial investor in the Sowood private-equity fund, whose assets increased 10-fold in two years to $2.3 billion as of December.

Sowood's name came from ``South Woodside Avenue,'' the street in Wellesley, a suburb of Boston, where Larson lived when he started at Harvard Management. The fund raised $2 billion before closing to new investors.

Hedge funds are largely unregistered pools of capital that cater to wealthy individuals and institutions and allow managers to participate substantially in profits from investments. They control about $1.74 trillion, more than double the amount five ago.

As for the U.S. housing market, Zandi expects a lot more pain, but not a recession.
Here are some highlights of his forecast, based on a study using anonymous data collected by consumer credit agency Equifax:
Home prices will fall 10% from the peak nationally, more in the bubble regions in California, Florida, Nevada, Arizona and Washington, D.C.
Home sales could bottom later this year, home construction could bottom early next year, and house prices could bottom late next year. It'll be 2010 before the housing market could be termed "normal."
About 17% of total mortgage debt is at risk,
totaling about $2.5 trillion in subprime, Alt-A and jumbo debt.
About $1.4 trillion is at serious risk of default.
Investors will lose about $113 billion as $460 billion worth of mortgages default.
About 20% of the subprime loans written in the last half of 2006 will fail, with the peak of the defaults not coming until 2011. A "significant number" of these borrowers never made a single payment.
More than 2.5 million first mortgages will default this year and next year
...recession, although the jobless rate will likely rise to 5% from 4.5% by the end of the year.
...

Rex Nutting is Washington bureau chief of MarketWatch.

contracts 12 gigawatts of gas-fired power capacity – enough to power over 10 million homes.