Saturday, February 04, 2006

The End of Sub-Prime Lending

Liquidity for real estate will dry up this year because:

-Sub-prime lending is not as profitable as it was (as per this article.)
-Regulators are curtailing risky loans.
-Interest rates are higher than they were in '04 and '05 and are going higher.
-Increased loan losses will cause banks to tighten lending standards.

Subprime real estate loan party is over in 2006
By Janis Mara, Inman News

As the housing market slows, the booming subprime real estate loan market — loans for people with less-than-stellar credit — is also slowing, observers say, despite a long runup.

"In general, there's been a subprime boom over the last two years," said Jeffrey DerGurahian, senior vice president of capital markets at Metrocities Mortgage, "but Wall Street is getting concerned about the risks in these loans.

"Right now the execution selling loans to Wall Street is not as attractive as it used to be. People are afraid of the credit risk going toward a slowing market," the senior vice president said.



Blogger njcoast said...

I can't believe a house in Spring Lake just went under contract with a listing price of $5,250,00. I have been watching this house and had done some research on it. It is a new home built by WJM Homebuiders and the property was purchased in 2000 for $1,055,000. The house has a synthetic slate roof and couldn't have cost more than $1,000,000 to build. The house has been on the market for about a year and did not drop in price a penny. Even with the carrying costs, these builders stand to make a HUGE profit from this home. You'd think that someone with as much money as this buyer would do their research! I'll let you know what the actual sale price is when it closes, maybe the buyer lowballed the builder.

Saturday, February 04, 2006 10:13:00 AM  

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