This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Housing's Roof Collapsing

There are fresh signs the housing market could be headed for total disaster.

Look at the huge quarterly losses reported Tuesday by D.R. Horton (DHI - Get Report), the country's largest homebuilder, and Freddie Mac (FRE), one of the largest purchasers of U.S. home mortgage loans .

Or check out Standard Pacific (SPF - Get Report), a builder heavily leveraged to the California housing market, whose stock has dropped about 40% in five days on no new company news but a plethora of liquidity worries.

Falling housing prices, coupled with high consumer mortgage debt payments, are causing homeowner defaults and delinquencies to increase. This is leading to larger loan losses, which has hit homebuilders, mortgage lenders and large financial institutions like Citigroup (C - Get Report) and Merrill Lynch (MER).

The drop in housing prices is causing most of the pain. A report from real estate information firm released Tuesday shows that U.S. home values fell 6% in the third quarter, the largest decline in the last 10 years (since the firm began tracking the data).

On top of that, nearly 16% of homeowners who bought houses in the past year now have negative equity in their homes, meaning they owe more than what their homes are currently worth, the report says.

On Tuesday, Freddie Mac, the second-largest purchaser of U.S. mortgages, reported a $2 billion loss due to increased reserves for loan losses and impairments of existing loans. Freddie Mac is now facing a problem where it has to put aside money to protect against past loans, rather than put that money to use in new loan purchases.

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
C $53.07 0.00%
DHI $28.27 0.00%
LEN $48.58 0.00%
PHM $22.19 0.00%
SPF $8.59 0.00%


DOW 17,826.30 -279.47 -1.54%
S&P 500 2,081.18 -23.81 -1.13%
NASDAQ 4,931.8150 -75.9760 -1.52%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs