mortgage rot spreading...

American Home Mortgage (AMH) took a beating, today, down 15%. Here's the relevant information from Marketwatch:

"During March, conditions in the secondary-mortgage and mortgage-securities markets changed sharply," said Michael Strauss, American Home's chief executive, in a statement. "While the market may recover ... our working assumption must be that current market conditions will persist." (Marketwatch)

"The company announced that it's stopped offering certain types of Alt-A loans." (Marketwatch)

So, now it's official: the subprime mess has spread to the Alt-A segment of the market. Last year, only 60% of mortgages issued were prime. Subprime lending has contracted 25-30% already this year. If Alt-A does the same, that's 20% of the market that has been removed from the pool of home buyers. Demand for homes will continue to decrease, and the supply of homes will increase.