In an April essay discussing the housing market and the subprime lending issue, Bill Gross, manager of the $102 billion PIMCO Total Return Fund, discusses a grim reality in what was once the American dream–owning a home. "U.S. homeownership has expanded from 65% to 69% of households since the turn of the century, in part because it became so easy, and so cheap, to finance a home," he writers. However, "home prices, as measured by the National Association of Realtors, have gone down by 2% nationally over the past 15 months and there's fear in the air that it could get worse."
Gross attributes the problem not to the "frequently heralded increase in subprime delinquencies or defaults," but rather "foreclosure losses as a percentage of existing loans will be small and the majority of homeowners have substantial amounts of equity in their homes." Yet this phenomenon is something Gross thinks leads analysts to believe "the subprime crisis is or has been isolated and identified for what it is–a small part of the U.S. economy."
