Ian Mathias

Almost a year ago today, we forecast the “second wave” of the housing crisis — a flood of option and Alt-A ARMs due to resent in early 2010. This chart was our pièce de résistance:

phpAg7vql

Today, we admit we were wrong… the second wave of the housing crisis will likely be even bigger then we expected. Analysts at Credit Susie have updated this cult classic chart. Check it out:

php1LG3Uf

Now, they’ve done you no favors with this whole color scheme/format change, so here’s the meat of the updated chart: Credit Suisse added an “unsecurtized ARM” category to the coming wave of resets, a move that bumps monthly loan resets up $2-5 billion. Monthly resets are now larger across the board.

What’s more, the “second wave” crisis that was thought to be over in late 2011 is now crashing down well into 2012. According to the group, the swell of option and unsecuritized ARM resets will not only be bigger than the subprime fiasco, but now it’s forecast to last twice as long. Hmmm…

“Housing is typically the sector playing the starring role in most U.S. economic recoveries,” writes the Richebacher Society’s Rob Parenteau, “along with consumer durables like autos, furniture and electronic appliances. Public infrastructure plus cost-cutting capital equipment expenditures will have to pull more of the load this time around, but these factors won’t kick in until next year.

“There is still no sign of life in the mortgage applications for new purchases — at best, they are stabilizing in recent weeks. Refinancing activity remains strong, although off the earlier highs. We conclude this sector, which tends to lead the business sector, and should be a beneficiary of low interest rate policy moves, is, at best, stabilizing of late. That is, stabilization in activity terms, or production and sales — to be sure, home price deflation still reigns, and prime mortgage delinquency and default rates are, consequently, still climbing.” writes the Richebacher Society’s Rob Parenteau, “along with consumer durables like autos, furniture and electronic appliances. Public infrastructure plus cost-cutting capital equipment expenditures will have to pull more of the load this time around, but these factors won’t kick in until next year.

“There is still no sign of life in the mortgage applications for new purchases — at best, they are stabilizing in recent weeks. Refinancing activity remains strong, although off the earlier highs. We conclude this sector, which tends to lead the business sector, and should be a beneficiary of low interest rate policy moves, is, at best, stabilizing of late. That is, stabilization in activity terms, or production and sales — to be sure, home price deflation still reigns, and prime mortgage delinquency and default rates are, consequently, still climbing.”

Ian Mathias

Ian Mathias is the managing editor of Agora Financial's Income Franchise, where he writes and researches about retirement, dividend and fixed income investing. Much of his work is featured in The Daily Reckoning and Lifetime Income Report, Agora Financial's flagship income investing advisory.  

Previously, Ian managed The 5 Min. Forecast, a fun, fast-paced daily look into the future of global markets and macroeconomics. He's also worked in public relations, where media outlets like Forbes, AP, Yahoo! and MSN Money have syndicated his writing. If he's not at work, you'll probably find Ian on a bicycle, racing up and down the "mountains" of Baltimore County. Ian has a BA from Loyola University in Maryland. 

Recent Articles

Addison Wiggin
A Manifesto, of Sorts

Addison Wiggin

More than a decade ago, Addison Wiggin helped co-found the Daily Reckoning with Bill Bonner. Today, he recalls this life-changing experience, and explains how - despite being rooted in the world of finance - it is and will always be about much more than money. Read on...


4 DIY Halloween Costumes You Can Make in 10 Minutes or Less

Peter Coyne

Halloween is tonight! And just in case you waited until the last second to think about what you're going to wear, here are four costume ideas you can easily put together in about 10 minutes or less. With these costumes you'll be the hit of your friend's party - provided you're friends with a bunch of economists. (Downloadable masks included...) Happy Halloween!


Bill Bonner
4 Basic Truths to Help You Navigate the Financial News

Bill Bonner

The financial news is full of misinformation - reported by unreliable pundits and taken at face value by an easily swayed public that doesn't really no better. That's why today, Bill Bonner relays the four basic truths he's discovered during his 30 year career in the financial industry to help you make sense of it all. Read on...


Extra!
How YOU Can Help Pass the Swiss Gold Referendum

Grant Williams

For those who doubt the effectiveness of the Swiss Gold Initiative, Grant Williams has a few startling charts to show you. Today, he relays just how popular this movement is, and how you can actually influence the outcome... no matter where in the world you call home. Read on...


How Small Cap Stocks Saved the Market

Greg Guenthner

For most of the year, no one wanted small cap stocks in their portfolios. But over the last three weeks, few sectors of the market have performed better than small caps. Greg Guenthner explains how to use this to your advantage... and what to expect for the rest of 2014. Read on...