How many times have you heard the term "CDO's" or Collateralized Debt Obligations? I think I've heard that term 6 times this week alone. Amazing! These are creative debt instruments that banks have come up with to make the whole lending arena easier and more fluid. The down side is that these little guys are now wreaking havoc through our entire industry. I finally saw a headline article in the Wall Street Journal today (12/21/07) titled: "Fraud Seen as a Driver In Wave of Foreclosures" You're kidding right? How on Earth did they come up with that one? How many of us Real Estate Professionals figured that one out a long time ago? Sorry, I just get bent out of shape when we finally see a headline like that one months and months after the fact.
For those of you out there who are wondering what is going on with the billions and billions of write-offs in the industry, let me be the first or possibly the 5th person to say that I do not think there is anyone out there who can foresee the future. There have been great debates on both sides of the great question: "Is a recession inevitable?". I don't know if a recession is due, but I do know that these write-offs are not finished yet! The good news is that prior to 2007 our great Residential Real Estate Economy was approaching 20+trillion in value. Obviously that numbers has declined during 2007, but remember how many billions make up just one trillion! Although these billions represent a substantial amount in write-offs and will utlimatley effect even the equity markets, our Residential Real Estate Market is very robust!