When a leading banker says things look 'terrible', one know they must be really bad. Jamie Dimon is CEO of JP Morgan Chase, the only major US bank not to take write-downs on its housing loans to date. He described the US housing market as follows: 'We saw subprime go first, then you see home equity go and then you see prime go.' He then added, 'the prime looks terrible. We're sorry, but it looks terrible.'
'Prime' is comprised of loans made to high quality borrowers, who would normally have negligible default levels. These are people who have steady jobs at executive levels. But the latest Case-Shiller US house price index shows why Dimon was so downbeat. Compared to last year, US house prices are now:
• Down 16% on a national basis, and falling in every major US city
• Down nearly 30% in Miami, Los Angeles and Las Vegas
And it is likely that there is worse to come. Inventories of new and existing homes are still very high, even though the spring is usually the peak time for home sales. Last month, existing home inventory actually rose to 11.1 months.