This morning, Novak said:

It is difficult to exaggerate the pessimism about the immediate political future voiced by Republicans in Congress when not on the record. With an unpopular president waging an unpopular war, they foresee electoral catastrophe in 2008, with Democratic gains in both the House and Senate and Hillary Clinton in the White House.

There are a bunch of reasons for this. But let’s put the housing stuff in context. We are at the very beginning of the crunch. Here is when the adjustable rate mortgages reset:

In other words, over the next several months there will be a sharp increase in the number for foreclosures and it will not calm down until late 2008 or early 2009.

My expectation is that this will be the largest general election issue in swing states out west and in Florida. And it will emphasize the importance of issues linked to economic insecurity like health care. Especially if we begin to pull out of Iraq in September. After all both Hillary Clinton and Barack Obama legislative staffers admit that their plans would result in 100k military in Iraq for the medium term.

1 Comment » More housing mess · August 21, 2007 at 12:18 PM

[…] The top-line story is that July foreclosures are 9% above June. Recall several facts. First, foreclosures come about 6 months after default. And if ARM resets are a predictor of future default and foreclosure rates, the amount of subprime loans reseting in January and February (these numbers) will double by the end of this year. And these levels of default and foreclosure will stay pretty solid through the end of 2008. Just to be clear, some analysis from John Mauldin: Research by RBS Greenwich (assuming I read it right) suggests that 20-23% of the subprime loans made in 2006 will go into default and foreclosure. I talked with one head of a mortgage brokerage business in California this week (he has over 800 brokers who work for him) and he thinks that home values in certain areas he services could drop by as much as 50%. […]

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