The USA home market fell 15.4% in the 2nd quarter of 2008. This was an all time price plunge record which exceeded the previous record holder (1st quarter '08 - 14.2% drop). What is most concerning is that traditionally the 2nd quarter of any year is usually the best time to sell a home (Spring to Summer months). 

How bad will the 3rd and 4th quarters be as they are typically slower selling time periods with kids going back to school, and the various holiday months? The increasing foreclosures continue to drive prices downward which, in turn, causes more foreclosures and property declines for their neighbors.

Lenders continue to tighten their underwriting guidelines which makes it tougher for buyers to purchase properties. This is partly due to the near bankruptcies of both Fannie Mae and Freddie Mac. These major secondary market GSEs currently hold up to 70%+ of all U.S. residential mortgages.

California, Arizona, Nevada, and Florida continue to be hit the hardest with price declines as those areas also had the biggest price jumps over the past seven years. Many parts of the "bubble" states doubled in value within a 3 to 7 year time period. Now, these same areas may drop 50% or more within a 12 to 18 month time period.

Warren Buffet just said that Fannie Mae and Freddie Mac don't have any net worth as they are completely insolvent. I agree with him as both Fannie and Freddie are "glorified hedge funds" with trillions of dollars of on and off balance derivatives investments. They may not be acknowledging all of their liabilities.

Fannie and Freddie currently own upwards of 70% of the existing mortgages nationwide. We need Congress to take back the formal ownership of both GSEs, and slowly start to sell of some of the prime assets for much needed collapse.

If Fannie and Freddie go under, then the entire financial system worldwide is at risk of complete collapse. Fannie and Freddie dwarf any existing banks or investment banks in the world so their solvency is critical to the world.

Even though the "Federal" Reserve (a private entity) stopped releasing the monthly M3 money supply data to the general public in 2006, this M3 Money Supply (the broadest aggregate of liquidity or cash) dropped the most in recorded history last month. This information was compiled by various sources who analyze as much information as possible in order to determine these numbers.

Shadow Stats (www.shadowstats.com) is one of the most respected economic and finance websites in the world, and they are agreeing with a lot of this same data reported by the London Telegraph paper. In layman's terms, this information means that banks aren't offering many loans, existing credit lines are being pulled at record numbers, credit card issuers are cancelling their existing accounts with their customers regardless of their clients' payment histories, and consumers are surviving with dangerously low cash levels on hand (checking, savings, pension, etc.).

I continue to hear rumors that the financial markets may "crash" toward the end of September or early October. Many people in the "know" are advising their friends and family to hoard their cash in order to stay as liquid as possible in order to avoid any potential financial meltdowns in the near term. I am expecting many banks to collapse in the near term, and I expect that these same banks will be forced to unload their properties at any price for much needed cash.

Kenneth Rogoff, the former chief economist for the IMF (International Monetary Fund), is predicting a "whopper" bank or investment bank collapse in the near future. Is he referring to Washington Mutual, Merrill Lynch, or possibly several other well known financial institutions completely going insolvent? Many banking analysts have recently made these allegations as well.

Rogoff also said that he didn't think that either Fannie Mae or Freddie Mac will exist in their current forms by next year. I have to agree with him on that guess as they are both glorified hedge funds with massive unrealized and unacknowledged "off balance sheet" derivative investment debt (CDOs, SIVs, CDS, etc.). 

Once the accountants get through their numbers, I expect they will be broken off into pieces and sold off to various private financial entities. As Fannie and Freddie currently own up to 70%+ of the entire U.S. mortgage market, this may or may not be a good thing for the rest of us.

We continue to establish more and more direct contacts for REO (bank owned foreclosure) pools within a $5 Million to a $1 Billion price range. Banks are taking back properties at record numbers throughout the United States. Specifically, the "bubble" states of California, Nevada, Arizona, and Florida have the highest percentage of non-performing loans and REO property inventories.

We are now "custom compiling" REO pools based upon our investors' interests. If you want to find discounted properties priced at between 30% to 50%+ of the current estimated values, we may be able to provide you the lists of properties available to purchase now. We may create the lists based upon property types, cities, zip codes, individual price ranges per property, and discounted price range.

If you have an interest in some of these REO pools nationwide, then please send us an email and some sort of "proof of funds" to close in a timely manner. We will then create the lists for you, and we may also be able to provide you financing up to 75% to 80% of the purchase price. These loans may include partial release clauses so you may sell or refinance individual properties whenever you want to in the near future.

According to Zillow (a real estate valuation website), 1/3 of all American homes purchased who purchased their homes within the past 5 years may now be "underwater" (or have negative equity). The numbers of "upside down" homes in California may be significantly higher as the state has experienced a 35% median priced home drop within the past 12 months alone.

The number #1 reason why California homeowners walk away from their homes is due to negative equity. As the 2,000+ foreclosures filed per day in California continues to escalate, the odds increase that more homeowners may walk away from their homes. This becomes a "negative feedback loop" or a "vicious downward cycle" as more foreclosures causes more foreclosures, which causes more value drops in neighborhoods.

Now the numbers are beginning to escalate into a downward "death spiral" for properties in California. There were over 26,500 homes taking back by banks in the month of July alone. 

The dollar amount of loans taken back by banks in California were over $12.5 Billion. This was a 25% increase over the previous ALL TIME record months of May and June ($10 Billion Plus each). 

In a high percentage of cases, the properties had large 2nd mortgages which were completely wiped out. This dollar losses are usually not even counted in these dollar amount losses. I would venture to guess that the dollar amount of loans taking back AND the completely wiped out 2nds at the final Trustee's Sale were closer to $15 Billion plus in July alone. 

Property owners are seeing their new lower sales comps being established by these horrific foreclosure numbers. Investment groups who are purchasing these discounted REO pools at 50 cents on the dollar or below are seemingly the only ones making any great money these days in regard to California real estate.

Nouriel Roubini, one of the brightest economists and financial analysts in the U.S. as well as a professor at NYU, recently predicted that hundreds of U.S. banks may fail due to the ongoing Credit Crisis. Roubini has been much more accurate in his predictions than any other well known analyst the past few years. 

While other "analysts" were predicting that the Credit Crisis would be "mild" and short lived, Roubini continues to predict that we are closer to the start of the financial meltdown than toward the end. He equated the Credit Crisis timeline with a baseball game recently. He said that we may only be in the 2nd inning of a 9 inning basedball game right now. 

Roubini also expects the credit card securitization meltdown to be as severe as the housing meltdown. He expects banks to lose at least $1 to $2 Trillion in the near term. Roubini also expects the problems to last another 1 1/2 years, and then he is bullish on the American economy after that time period.

General Motors, once the largest company in the world, just reported a $15.5 Billion dollar loss for the 2nd quarter. This was the third worse quarter for the company in its 100 year history. 

GM also recently suspended health benefits for many of their retirees in order to reduce their cashflow problems. GM expects the downturn in sales to continue into at least 2010.

As the Credit Crisis continues to worsen, auto sales have dropped significantly nationwide in recent times. Many auto lenders are getting out of the leasing business due to the high number of defaults by their borrowers. It was once said that "America goes hand in hand with the state of General Motors". This may not be a good sign for the state of the American economy.

Alt-A Mortgage loans nationwide reached 12% in April of this year. Alt-A (or "alternative A credit loans") usually were issued to people with solid credit scores near 700 or above. Many of America's biggest mortgage lenders (Countrywide, WAMU, Wachovia, IndyMac, Downey Savings, etc.) issued a high percentage of their entire mortgage loans as "stated income" fixed or adjustable loans (3 or 5 year fixed, or option pay ARM adjustables). 

As many of these Alt-A adjustable loans were issued in 2005 and 2006, they are now beginning to reset to higher rates and payments. As a result of the higher payments, the number of delinquent mortgages continue to increase. Some lenders are rumored to have 20% to 30% of their entire mortgage portfolio that are in some form of delinquency right now. These are scary numbers which may only worsen in the near term.