I’m in California this week, which is why posting is rather light: the beach is rather more attractive than squabbling over mortgage-backed bonds. But of course California is the poster child for the housing market boom and bust, and so one can’t get away from it entirely — and the LA Times leads this morning with a story headlined “As sub-prime lender implodes, housing shudders“. It also has another story, headlined “Home woes don’t hurt most bonds“.
It’s rare that I go out of my way to praise newspaper articles which have essentially no new information in them, but in this case both articles are clear, fair, and informative. The lead article explains that New Century Financial, which is based here in Orange County, “skidded closer to bankruptcy Monday, stoking fears that the mortgage industry’s woes could further damage a sluggish housing market.” It went on to explain that with refinancing options being taken away from them, many subprime borrowers are defaulting and could end up in foreclosure. With less demand from subprime buyers and more supply from foreclosures, the housing market is certain to be adversely affected to some degree. But the story also has a quote from Pimco’s Scott Simon, saying that the MBS market — which is by no means the same thing — “should be just fine”.
The bond-market article explains that subprime MBSs might be performing very badly at the moment, but that there’s no sign of a more generalized flight to quality, nor any risk of a more generalized credit crunch.
So bravo to the LA Times, and its journalists David Streitfeld, E. Scott Reckard, and Tom Petruno. I’ve seen more than enough overheated scaremongering in recent months to know that writing sensible articles like these is harder than it looks.