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BB&T Corporation Message Board

  • nobankersplease nobankersplease May 9, 2011 9:46 AM Flag

    Zombie banks and Homeowners

    below are excerpts from a recent article. Recall BB&T was showing some loan growth in this sector, but you will see those year over year loan growth figures abate....the only surge they showed was due to the all the dumb stimulus and the really really low refi rates in Q4 of 2010. There will be little to no loan growth in this sector for BB&T, and this is their bread and butter. They know this, and that is why they are stating they need to become "commerical lenders," but they have no experience in that. Very troubling....

    Average home prices are down 8% from a year ago, 3% over the quarter, and are falling at about 1% every month, according to Zillow. Percentage of homeowners in negative-equity positions — with a home worth less than its mortgage — has rocketed to 28%, a new crisis high.

    Zillow now predicts prices will fall about 8% this year and says it no longer expects the market to bottom before 2012.

    “There’s no way we can get to flat, from these depreciation levels, in the last nine months of the year,” says Zillow economist Stan Humphries. “Demand is a lot more anemic than we had previously thought.”

    When in 2012 does Zillow see the market bottoming out? Humphries won’t say. What a foolish boondoggle those tax breaks for home buyers have turned out to be. The government spent an est $22 billion between 2008 and 2010 on tax breaks to prop up the housing market. All it achieved was a brief suckers’ rally that ended last summer.

    “As we said at the time, it was a giant waste of money,” says Mark Calabria, economist at the conservative Cato Institute. “None of these things really turned the housing market around. They just put off the adjustment for awhile.”

    It’s hard to overestimate the scale of the carnage in the housing market. Zillow found prices fell in all but four U.S. metro areas.

    Falling real-estate prices mean spiraling hidden losses throughout the economy, from banks to homeowners.

    Remember Japan’s “zombie banks”? These were the financial institutions that haunted that country’s economic recovery after the 1990 crash. They staggered on with huge losses they could never repay — the walking dead.

    Here in America we have “zombie homeowners.” Millions of them. According to Zillow, a record 16.3 million families are upside-down on their home loans. And many are a long way upside-down. Their homes may never be worth as much as their mortgage. But they are hemorrhaging cash to pay the nut every month.

    ‘Demand is a lot more anemic than we had previously thought.’ Stan Humphries, Zillow Recovery? What recovery? This looks a bit like a depression to me.

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