{"id":2064,"date":"2007-10-19T06:36:15","date_gmt":"2007-10-19T13:36:15","guid":{"rendered":"http:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/?p=2064"},"modified":"2007-10-18T06:40:22","modified_gmt":"2007-10-18T13:40:22","slug":"sub-prime-mortgage-crisis-caused-by-unexpected-success","status":"publish","type":"post","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/2064\/sub-prime-mortgage-crisis-caused-by-unexpected-success\/","title":{"rendered":"Sub Prime Mortgage Crisis Caused By Unexpected Success"},"content":{"rendered":"

Sub prime mortgage are defaulting at record proportions.\u00a0 Lenders are closing their doors and confidence is waning on Wall Street. Greed, corruption, and irresponsibility have all been cited as the reasons for this contraction and collapse. While these factors might be contributing reasons, they are all byproducts from the underlying reason:<\/p>\n

The real estate markets behaved better than were expected.<\/strong><\/p>\n

Understanding this concept will require a mastery of Dan Green’s presentation proving that real estate data is granular <\/a>and not mosaic. Dan said:<\/p>\n

But real estate is <\/em>not<\/em> a national story, folks. It’s highly, highly local.<\/p>\n

To beat the point home, when you buy your next home, it won’t be a home that exists in all 50 states. It will be a home that exists in one state, in one town, in one neighborhood, on one street and that has its own character and economics. Much like the small pictures above.<\/em><\/p>\n

And that’s what real estate is — it’s a series of very, very small pictures.<\/em><\/p><\/blockquote>\n

Lending developed into a national, or to use Dan’s analogy, mosaic, business. Local factors weren’t considered in the modeling when Wall Street developed the guidelines for Alt-A and sub prime loans. The Wall Street forecasters were correct in their assumptions that real estate was undervalued… nationally. The aging baby boomers and short supply would apply steady pressure on prices in the first decade of this millennium. Nationally, they expected properties to appreciate faster than the prior appreciation rate; they just didn’t anticipate that local markets would behave outside of their model.<\/p>\n

Let’s set “ground zero” to Y2K. Wall Street forecasters expected real estate to appreciate at a rate exceeding 6% per annum. It did. They loosened loan guidelines, in a quest for yield, protected by rapidly appreciating collateral. Desirable areas, like Southern California Vegas, South Florida, and Phoenix, led the appreciation wave at rates that were double the expected appreciation rate. Other parts of the country, Idaho, Utah, and Texas, didn’t follow the boom until 3-5 years later. Nationally, the numbers made sense to Wall Street.<\/p>\n

The Read more<\/a><\/strong><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Sub prime mortgage are defaulting at record proportions.\u00a0 Lenders are closing their doors and confidence is waning on Wall Street. Greed, corruption, and irresponsibility have all been cited as the reasons for this contraction and collapse. While these factors might be contributing reasons, they are all byproducts from the underlying reason: The real estate markets […]<\/p>\n","protected":false},"author":15,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_crdt_document":"","jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[8,26,5],"tags":[],"class_list":{"0":"post-2064","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"hentry","6":"category-investment","7":"category-lending","8":"category-real-estate","10":"no-featured-image"},"jetpack_featured_media_url":"","jetpack_sharing_enabled":true,"jetpack-related-posts":[{"id":1786,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1786\/how-big-is-the-sub-prime-mortgage-market-not-very-big-at-all\/","url_meta":{"origin":2064,"position":0},"title":"How Big Is the Sub-Prime Mortgage Market? Not very big at all","author":"Greg Swann","date":"August 10, 2007","format":false,"excerpt":"Cited by BusinessWeek Online, a very eye-opening analysis of the sub-prime mess from National Review Online:I\u2019ve thought a lot about Rain Man over the past few months as I\u2019ve been following the press coverage of the sub-prime mortgage crisis. The story\u2019s been on the front page of the Wall Street\u2026","rel":"","context":"In "Lending"","block_context":{"text":"Lending","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/lending\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":4418,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/4418\/fannie-and-freddie-fall-to-foreclosure-but-still-lenders-lend\/","url_meta":{"origin":2064,"position":1},"title":"Fannie and Freddie fall to foreclosure, but, still, lenders lend","author":"Greg Swann","date":"September 14, 2008","format":false,"excerpt":"This is my column for this week from the Arizona Republic (permanent link). \u00a0Fannie and Freddie fall to foreclosure, but, still, lenders lend I write this column at the beginning of the week, and it appears at the end of the week. My topics are usually timeless, but, if I\u2026","rel":"","context":"In "Lending"","block_context":{"text":"Lending","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/lending\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":2170,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/2170\/its-a-great-time-to-buy-but-this-time-for-different-reasons\/","url_meta":{"origin":2064,"position":2},"title":"“It’s A Great Time To Buy!” — But This Time, For Different Reasons","author":"Dan Green","date":"November 6, 2007","format":false,"excerpt":"You hang around enough real estate agents, and you start to understand why \"it's a great time to buy real estate\". The reasons are many: \"You get terrific tax deductions.\" \"Long-term, real estate is a fantastic investment.\" \"With so much product available, you'll be able to set your price.\" \"This\u2026","rel":"","context":"In "Lending"","block_context":{"text":"Lending","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/lending\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":1825,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1825\/the-peoples-choice-award-pick-the-best-of-this-weeks-real-estate-writing\/","url_meta":{"origin":2064,"position":3},"title":"The People’s Choice Award: Pick the best of this week’s real estate writing","author":"Greg Swann","date":"August 19, 2007","format":false,"excerpt":"Here is the (not very) short list of this week's nominees for The Odysseus Medal. You can vote for one of these posts for the People's Choice Award. These are this week's entires:Dan Green -- How Sub-Prime and Alt-A Mortgage Markets Are Behaving Like NFL Draft Picks Patrick Kapowich --\u2026","rel":"","context":"In "Blog Carnivals"","block_context":{"text":"Blog Carnivals","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/blog-carnivals\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":1042,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/1042\/is-the-subprime-mortgage-market-the-next-enron\/","url_meta":{"origin":2064,"position":4},"title":"Is the Subprime Mortgage Market the next Enron?","author":"Brian Brady","date":"February 13, 2007","format":false,"excerpt":"An excerpt from one of my recent posts on The Active Rain Real Estate Network: The sub-prime mortgage market is falling apart. Wall Street firms are being stung by the bad sub-prime loans they bought and have demanded that the sub-prime lenders buy those loans back. The sub-prime lenders didn't\u2026","rel":"","context":"In "Enduring Interest"","block_context":{"text":"Enduring Interest","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/enduring-interest\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]},{"id":2261,"url":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/2261\/the-odysseus-medal-competition-voting-for-the-peoples-choice-award-is-open-8\/","url_meta":{"origin":2064,"position":5},"title":"The Odysseus Medal competition — Voting for the People’s Choice Award is open","author":"Greg Swann","date":"November 25, 2007","format":false,"excerpt":"Twenty-five nominees. I confess that it's faster for me on Sunday if I'm not too picky, but this week saw a surplus of very good posts. Vote for the People's Choice Award here. You can use the voting interface to see each nominated post, so comparison is easy. Please don't\u2026","rel":"","context":"In "Blog Carnivals"","block_context":{"text":"Blog Carnivals","link":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/category\/blog-carnivals\/"},"img":{"alt_text":"","src":"","width":0,"height":0},"classes":[]}],"_links":{"self":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/2064","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/users\/15"}],"replies":[{"embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/comments?post=2064"}],"version-history":[{"count":0,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/posts\/2064\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/media?parent=2064"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/categories?post=2064"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.bloodhoundrealty.com\/BloodhoundBlog\/wp-json\/wp\/v2\/tags?post=2064"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}