Mortgage Rate News

The fallout from the subrpime lending crash is far from over, and this morning’s stock market holds the proof. Subprime writedowns are all the rage right now, with the latest coming from Merill Lynch, which reported a loss that more than doubled estimates. Bloomberg reports on the stock market right now, and where it’s at thanks to the subprime lending crash:

“Right now, this market is the Devil’s arcade,” said Michael Nasto, senior trader at U.S. Global Investors Inc., which manages about $6 billion in San Antonio. “We could still go lower from here because we don’t have our arms around the subprime writedowns.”

Merrill’s writedowns add to more than $100 billion of subprime-related losses reported since May by the world’s largest banks and securities firms. Citigroup Inc. posted the biggest loss in its 196-year history earlier this week as the largest U.S. bank’s subprime mortgage investments tumbled in value by $18 billion.

Financial sector stocks are hard-hit as the year gets underway, with those in the S&P 500 losing 6.8%. In 2007, financial sector stocks lost 21%. No one is expecting a quick recovery, and while there are investing opportunities to be found in the current stock market, it is important to take a good look at the fundamentals. Some companies may not make it out of this mess.

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The stock market is down today as credit ratings remain in doubt over losses related to the subprime mortgage crash. Additionally, Alan Greenspan is warning of a possible recession, and that isn’t helping the stock market, either.

MarketWatch reports on the stock market:

U.S. stocks on Monday extended losses into a second day as Moody’s Investors Services warned it could lower bond insurer credit ratings because of subprime losses and Alan Greenspan warned of a possible U.S. recession.

The subprime mortgage crash continues to affect the economy, even as Congress works to change FHA mortgage loan rules and the Bush Administration tries to stem the tide of expected foreclosures with a five year mortgage freeze.

Most of these fixes, however, are only band-aids. The new FHA mortgage loan rules will mainly benefit first time homebuyers and will do virtually nothing for those faced with foreclosure. Additionally, attempts to fix the economy with increased liquidity, bailout plans and mortgage rate freezes will not hold up in the long term.

Right now, real estate investing should be something to be wary of, as well as investments in real estate related industries like mortgage lending and building. Some stock investments are available at bargain prices, but it is important to choose carefully; while some stocks will recover and you could see great returns by investing now, others will not recover.

And it is worth noting that many do not feel that U.S. housing prices have bottomed yet, so real estate flipping is not the best idea right now, and waiting until next year to buy real estate may be a better idea. Bloomberg reports on the housing market and the economy:

“We’re only halfway through the housing shock,” said Ethan Harris, chief U.S. economist at New York-based Lehman, the fourth- biggest U.S. securities firm by market value. “It’s just a matter of time before the weakness spreads to the rest of the economy.”

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