According to Reuters:
Authorities in Philadelphia will suspend foreclosure sales of homes whose owners have fallen behind on adjustable-rate subprime loan payments — potential relief for tens of thousands of struggling debtors.
Sheriff John Green said on Friday he would halt sales of foreclosed properties in April and would seek a court order extending a moratorium for an unspecified period.
This is so riddled with moral hazard, it may be a sign of how dreadful things are becoming in the US housing market.
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After posting this yesterday, I today discovered:
- In “The Independent”, USA 2008: The Great Depression
- On ABC News, Are We Heading Into a Depression?
Twenty eight million Americans on food stamps? Even taking into account recent publicity about the programme, this record is worrying.
According to economist Robert Parks, there is a 60% chance of depression in the USA.
What prompted Parks’s pessimism is his assumption that the “right-wing ideology” prevalent in the White House will keep Washington from acting to ward off a major depression. A fan of famed British economist John Maynard Keynes, who called for major government spending programs to remedy the Great Depression of the 1930s, Parks would like the federal government to step up outlays to fix rickety bridges, repair pot-holed roads, improve schools, and more to provide more jobs, more income, and thus more spending to cure any economic downturn.
All very well, but governments are short of cash too…
I am concerned about something. By every fundamental measure I know of, the collapse of the UK housing bubble should be worse than the American one. Prices are stretched further beyond historical norms (relative to average earnings) than they were in the US, and AIUI a higher proportion of our lending was given without a deposit required (the infamous Northern Rock 125% mortgage being one careless example).
Would anybody like to take a guess on the level of default we should expect to start seeing in the UK market, and to what degree are international hedge-funds exposed ?
All talk about the predicted ‘bottom’ of the credit crunch seem to be based entirely on the US housing market (and the ‘mainstream’ predictions seem to keep underestimating the problem there).
What will happen to international credit markets when Irish, Spanish and British mortgage securities start to smell bad too?