Bloggy Business Today

On the heels of the sub-prime mortgage crisis within the United States, it seems that every time one looks at the news a new sector of the real estate industry has been affected in a dangerous and financially scary domino affect. Whether this is confirmation bias at work or an actual trend is best left up to the analysts, but what is definitely true is that the housing slowdown has now reached the very heart of the US real estate market, a place that was previously thought to be somewhat well insulated from the effects of the mortgage crisis.

The heart of the US market has always been resale homes, as these homes tend to circulate around communities in a way that really isn’t that relatable to the sub-prime mortgages that caused the real estate bubble to burst. However, with sales falling by 1% in April and record highs being recorded in the number of resale homes that have gone unsold, there can be no doubt that the housing slowdown has now permeated its way through the entire US housing market. Where things will go from here is anybody’s guess, but if you’re looking for the silver lining then perhaps it would be that things can’t really get that much worse.

Sub-Prime debt is one of the few things that the market in the United States has an excess of and of course nobody really wants to purchase it when push comes to shove. Still, there are even fewer companies that think they might be able to turn it to their benefit, but apparently Black Rock Incorporated is one of those companies as they just announced a plan to spend $15 billion in order to acquire a significant amount of Sub-Prime mortgage debt.

Specifically, they are working with Swiss Bank UBS AG on this deal, although the details of the overall deal will not be released until the end of trading tomorrow. The only thing that is known is that the overall debt is worth $20 billion, which gave the New York based Black Rock a sweet discount of 25% on the debt money which they are going to attempt to get investors for, maintaining a minority share and therefore participating in any gains that might occur.

Overall, investors of both Black Rock and UBS AG reacted positively to the news and both companies did relatively well over the remaining hours within the stock trading session.