New Century Financial and mortgage banking sector’s subprime fallout is just tip of the iceberg – deflation in real estate
Sam Adelton
Mar. 12, 2007

The second largest US subprime lender teetering on the edge of bankruptcy. The New Century Financial is in deep trouble when the halt on its trading of stocks are lifted finally. The mortgage-lending problem is spreading like wild fire. You are seeing just the tip of the iceberg now.

The mortgage defaults and consequent real estate foreclosures are dragging the economy to deep recession. The problem lies in the lowering of loan underwriting standard to pump liquidity in the economy. The Federal Reserve is taking some actions in this regard now. But it may be too late and too little.

The effect on the economic growth is severe. The reason is simple. The consumerism in America was fueled by home equity loans and personal loans in the last five years. The booming construction industry was also the result of the same. But after the bubble has collapsed, the fall out is spreading very fast. The foreclosures will lower the real estate prices further. That will provide fewer incentives to pay hefty mortgages. Instead, people will hand over the keys to the homes and walk away. This in turn will lower the prices of real estate further.

Real estate has entered the red zone of deflation. Deflation is feeding itself and the cause and effect coinciding into an implosion in home prices.

It is possible that the world will for the first time witness the crash in real estate markets. It will start in US and spread all over the globe. That in turn will cause the global depression with Asia being hit the most.

Bear markets are proportional to the size of the bubble that did burst – world has not seen so many bubbles at the same time – what happens to stock market?
Peter Oberois
The number of bubbles and their intensity that happened between 1997 and 2007 are of unprecendented levels.The effects of so many bubble bursts can be catastrophic and the world economies can get depressed.
READ MORE>>

Whats waiting for gold and silver? A spike and then collapse?
Karen Zuba
Interestingly, as the finacial meltdown takes place, it will give rise to another bubble in precious metals and then another bubble burst in the same!
READ MORE>>

Oil price models manifest confirmation to deflation theory – oil below $30 a barrel, Dow below 4000?
Peter Oberois
The analytical models tracking crude oil prices are sending warning signals for the economy. The crude oil future market and its derivatives are forming the long term tops and cyclically is ready to collapse to levels unimaginable.
READ MORE>>

New Century Financial and mortgage banking sector’s subprime fallout is just tip of the iceberg – deflation in real estate
Sam Adelton
The problem lies in the lowering of loan underwriting standard to pump liquidity in the economy. The Federal Reserve is taking some actions in this regard now. But it may be too late and too little.
READ MORE>>

The world investment scenario supports buying yen selling global stocks
Marla Guthrie
The higher Yen also means higher Yuan. The Asian currencies are in general under pressure from the Euro Zone and the United States to find some fair exchange rate grounds that allows free trade.
READ MORE>>

MORE ARTICLES >>