re: Wall Street: Housing market to see 2nd biggest home price decline since Great Depression

The WSJ should point out that the "reported foreclosure numbers" are actually highly inaccurate. The reason they are inaccurate is they are only counting Government owned RMBS not privately owned mortgages (i.e. Goldman Sachs, State of Louisiana Employees' Pension Fund, Wells Fargo, etc.). The numbers are mortgages that FHA, VA, USDA, Freddie/Fannie report that they are holding on to. The actual foreclosure numbers are typically double the reported numbers.

The bigger issue with the housing market is the non-bank lender & wholesale lender crash that is starting to take place. The Bond Markets have priced in interest rates dropping back down to the 4-5% range in 3-4 years. The average RMBS investor needs at least 7 years of servicing a loan to turn their first profit. If a consumer gets a new loan for a home today or refinances today at say 7% that means these private investors will take it in the short and curlies in 3-4 years so they are no longer buying.

This has caused the credit risk spreads to jump to such a level that the private sector are no longer purchasing loans right now. The non-bank lenders often sell their loans and if there are no buyers for their loans then they are forced to sit on those loans. They have no ancillary income to make up for loans to sit on their books which means their credit facilities will dry up and they will either be forced to sell at a firesale price or file for bankruptcy protection.

The same issue is going on with the wholesale lenders as the private money no longer wants to purchase any brokered loans which are now deemed to be even more risky. Almost everyone is exiting the wholesale market right now.