Huge housing price decline

And these are just the numbers up to October. Chances are, prices have dropped even further by now. The composite drop for L.A., where we moved from in Jan 2007 was 8.8%. However our agent there told us a few months ago if he were to put the house on the market then, it would be at 10-15% less. Plus, when we moved (right before subprime hit), there were few if any foreclosures in the area. Now there are dozens. Yikes.

Seem like homebuilder stocks will have further to drop.  How can they compete  pricing new homes against  forced sales at bargain prices (assuming there are any buyers…)

Moody’s to announce biggest rate cuts yet on subprime losses

 That dead cat bounce may be over faster than we thought.

E*Trade gives investment banks a haircut

E*Trade was forced to sell $3.1 billion of assets recently for 27 cents on the dollar to raise money. If you factor in the stock they issued, then they got 11 cents on the dollar. Surprisingly (or maybe scarily) 73% of those mortgage-based assets were not subprime, but prime.

Because of these sales, pricing now exists for what previously investment banks were marking-to-fantasy because they said there was no obvious price. Now there is. Which means investment banks will now have to put their toxic sludge back on the books at the new, severely marked down price.

Yeah, the market rallied last week. Seems a dead cat bounce / sucker’s rally to me. Given the above, such bizarre optimism won’t last.

Mortgage derivative indexes

AAA is investment grade, A is Alt-A, BBB is subprime. Even AAA is selling at 90% of face value. Alt-A is a sickening 35% and subprime is dead at 20%.

That’s assuming you can even sell them, which you can’t, because there are no bids. And there are hundreds of billions, maybe trillions, of dollars worth of these out there.

(update: The ABX may be more of a sentiment indicator than pricing, but with ETrade recntly selling some of their holdings, albeit in a forced manner, at 27 cents on the dollar, it would seem to be an accurate indicator too.)