From: "Rod Speed" 
Newsgroups: misc.invest.stocks misc.consumers.frugal-living misc.invest.real-estate
Subject: Re: Where did the 400 billion USD in subprime mortgage losses go
Date: Sun, 2 Dec 2007 07:18:27 +1100
Cancel-Lock: sha1:FLvXSLMiDguMPEtoIuL6FkISHBA=
Bytes: 2746

FrediFizzx  wrote
> mich  wrote
>> FrediFizzx  wrote
>>> Rod Speed  wrote
>>>> FrediFizzx  wrote

>>>>> Good example.  The money is still out there.  The people that sold at the top have the money.

>>>> No they dont when the whole market drops significantly due to the large
>>>> oversupply of houses that are the result of mortgage defaults with those
>>>> who should never have been given that mortgage in the first place.

>>> What the heck does that have to do with people that sold at the top?
>>> This totally answers the OP's original question as to where the
>>> money went.  It doesn't just vaporize.

>> The seller of the $300 000 house has $300 000 in cash.

>> The buyer had a $300 000 house that's only worth $250 000.

> So what?  That is an "unrealized" loss of $50K if the buyer hangs on to it.  In five years or so the house might be 
> worth $350K for an unrealized gain of $50K on the worth of the house.  If the buyer defaults and the bank losses the 
> $50K, the seller is the one who has the real money gain that the bank lost.

Usually not, because hardly any of the sellers just kept the pile of
cash. The vast bulk of them upgraded to a higher value property
and got fanged by the property downturn just like everyone else did.

And the original seller wouldnt normally have had the place fully paid off anyway.