Baseline Scenerio, a newsletter I suggest you subscribe to, linked to an update from S and P on loan losses associated with sub-prime and alt A mortgages and the numbers are not pretty. I would love to go back to look at their estimates from 2 years ago but my gut tells me losses at these levels were unimaginable. We have become so numb to mind-blowing loss numbers that it seems like old news but just sit for a minute and ponder these statistics from calculated risk.
– Subprime 2006 – 40% losses, 2007 – 31%
– Alt A 2006 – 27%, 2007 – 21%
– Loss severities are expected to rise to 70% foor 2006 and 2007 sub-prime
If this is old news the new bad news is still to come around commerical real estate. The size of that market is north of a trillion and some are estimating that property values are going to tumble 50%. I will keep my eye out for some good reading on this topic but keep your seatbelt fastened regarding this financial crisis, it is not over….