This surprisingly bearish post is suggesting that we are in the credit bubble rather than housing bubble, which is just a side-effect.

Traditionally, Mortgages have been low risk lending, as the loan is securitized by the underlying property. When banks were lending less than the value of the property (LTV), to people with good credit, who also were invested in the property (substantial down payments) you had the makings of a very good business: low risk, moderate, predictable returns, minimal defaults.

That model seems to have been forgotten. THIS IS REMINSCENT OF THE S&L CRISIS — where lenders did not have any repercussions for their bad loans!

By the release of the August housing numbers, it should become clear that the housing market is beginning a significant decline. When this realization hits home, investors will finally have to confront the fact that they are gambling on people who took out no-money-down, interest-only, adjustable-rate mortgages at the top of the market and the financial institutions that made those loans. The stock market should then begin a 25%-30% decline. If the market ignores the warning signs until fall, the decline could occur in a single week

It doesn’t take far to go for the example of mortgage originators troubles:

H&R Block Inc., the largest U.S. tax preparer, on Thursday said it expects to take a $61.3 million charge, or 19 cents per share, for losses related to rising delinquencies by subprime mortgage customers.

The losses total $102.1 million before taxes, and relate to H&R Block’s Option One Mortgage Corp. subprime lending unit

The bubble trouble, indeed.