Heads Up on Home Values

Home values have been dropping this past year. Economists and market analysts are busy trying to determine the effect that further devaluations could have on our economy.

Analysts that discuss the recent laxity in controls over the mortgage lending industry are making some dire predictions. Here's a quote from Joseph R. Mason and Joshua Rosner's report "How Resilient are Mortgage Backed Securities to Collateralize Debt Obligation Market Disruptions?" (36 page .pdf):

High yields in mortgage-backed securities in the past several years led to a massive infusion of collateralized debt obligation "hot money" into the mortgage-backed security sector in an environment similar to that of the thrift crisis of the late 1980s. Like the thrift crisis and its aftermath, therefore, recent events not only threaten these institutions, but also threaten the U.S. consumer and taxpayer as well.