All of the problems we’ve seen in subprime mortgages over the past 9 months are finally starting to show-up in the overall economy. Bear Stearns recently reported that two of their hedge funds are essentially worthless due to bad bets on subprime loans. Ben Bernanke said today during his congressional briefing that economic growth will be slower than expected due to the subprime fiasco. Over the past 6-months neither Bernanke or former Fed Chairman Greenspan thought the subprime problems would filter into the overall economy.
We hope to see a bottom to the housing market during the final two quarter of 2007. In order for this to happen, the mortgage lenders must first get over the shell-shock of the past 6-months. Most lenders were late to see the problems and will probably be late to see the opportunities that now exist.