February 28, 2006
Sorry, no link - from BusinessWeek. However, here's the killer quotes from Mozilo and Shiller. And don't forget, Mozilo has already cashed in bigtime, dumping his Countrywide shares.
Run. When the insider fat cat who made the loans is telling you it's about to fall apart (and in the media - not drunk at a cocktail party), trust him, it's about to fall apart. Amazing.
How severe are the price declines you are expecting?
MOZILO: I would expect a general decline of 5% to 10% throughout the country, some areas 20%. And in areas where you have had heavy speculation, you could have 30%. We will see…sellers back off from the prices they have been demanding. A year or a year and half from now, you will have seen a slow deterioration of home values and a substantial deterioration in those areas where there has been speculative excess.”
“SHILLER: In Los Angeles in the last cycle, prices peaked in 1989 and bottomed out in 1997. In that interval, L.A. lost 40% of its real value. I can see that happening there again or in any of the cities that have had tremendous price increases, and there are quite a number of them in this country. I think a pullback of as much as 40% is plausible in many places.”
Where are the most vulnerable areas?
MOZILO: Miami and Fort Lauderdale. Las Vegas is another area where there is heavy speculation. That means people were buying three, four, five condos at a time and thinking they can flip them. Those are the spots we have identified where… we will only make loans when we know the person will live [in the housing].”
“SHILLER: The most spectacular cases are Phoenix and Las Vegas. They soared so suddenly. But others [are vulnerable, too,] such as San Francisco, San Diego, L.A., really much of California.”
Posted by blogger at 2/28/2006