Friday, May 23, 2008

the “subprime” crisis and how we got into it

In April I posted an article from the Post Autistic Economics Network called The Strange History of Ecomomics. I hope you took the opportunity at that time to subscribe to this information goldmine. If you did - then you received issue 46 yesterday and you're already in information-hog heaven. If you didn't, here's a taste in the form of the very best and most detailed treatment I've seen to date of the subprime mortgage crisis. It's called Global Finance in Crisis by Jacques Sapir, and no, it's not even this issue's article on the Housing Bubble, (I haven't read that one yet) so there's still much else to look forward to;
The bubble bursts - Defaults increased steadily from early 2007 onwards, reaching 16% of the outstanding subprime loans by October 200719. By late January 2008, 24% of subprime mortgages were delinquent or in foreclosure. By late September 2007 nearly 4% of all mortgages were delinquent or in foreclosure, meaning that for non-subprime compartments the average rate of delinquency was 2% against the traditional 0.5% rate. By late January 2008 the figure was 7.3% of all mortgaged loans, and 3.7% for all non-subprime compartments or seven times higher than the traditional rate. During 2007, nearly 1.3 million U.S. housing properties were subject to foreclosure, an increase of 79% over 2006.
In February 2008, the number of foreclosures was at the highest monthly level since the onset of the Great Depression in 1929. Nevada was the worst hit state with a monthly foreclosure ratio of 1 in 165 homes, followed by California (a 1 to 242 ratio), Florida, Texas, Michigan and Ohio21.