What's happening to our neighbors, and perhaps some of us, right now

When people tell you that housing prices aren't going to take a beating, and that there will be no economic consequences to the mortgage bubble that's deflating, have a look at housing prices.

Then have a look at this video and consider that 1/4 of all mortgages originated in the last three years in California are exactly like this mortgage product.


Then, consider that refinancing to a fixed rate requires money down and actual housing value equal to the mortgage. With prices declining and negative amortizations sending loan values HIGHER than origination value. . . along with stringent credit score and down payment requirements that cannot possibly be met by most borrowers, there will be no refinancing.

Many people with these loans -- perhaps most of them -- will lose their houses and send the glut of unsold inventory even higher. Considering the bubbles that inflated in Southern California and the Bay Area, that's a big problem.

If you'd like a glimpse into our near-term future, take a look at Sacramento. Their bubble burst a bit earlier, since they had a wave of earlier "resets":


This recession and bubble brought to you by the Federal Reserve, the rating letter "C," and Democratic-Republican Party.