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Feb 04

Is The Fed Helping Or Hurting The Housing Market?

Fannie Mae and Freddie Mac: That went well

Image by qthrul via Flickr

There have been many predicts surrounding the housing market. Some say the worst is over and we are recovering now. Others say the worst is yet to come. The truth is it all depends on how involved the Fed wants to be. Take a look at this article and you will see what I mean.

Is Residential Real Estate a Ticking Time Bomb?

I know we all believe the housing bubble has already popped and all things real estate are over. One might think this post should be from 2006 from the title. But it’s not, this post is from 2010 and below are the reasons for the question.

First is the latest SIGTARP report saying the Government has become the mortgage market with U.S. taxpayers shouldering the risk. From the SIGTARP report we have a 100% government mortgage market at this point.

SIGTARP reports 100% of Ginnie Mae MBS are backed by FHA/VA/USDA, 100%. The current financial support for Fannie Mae and Freddie Mac is $1.4 trillion dollars. Look at the actual risk exposure of the above table of government backed GSEs, their MBS exposure, their funds and relationships. There is not enough taxpayers or bail outs in the world if those MBSes implode. I have to wonder if every single person in the U.S. was just given a home for free, if it would not be cheaper. Seriously.

Fannie and Freddie now have an unlimited bailout and it is estimated they have lost $400 billion dollars. The plan is to purchase $1.25 trillion mortgage backed securities from these two GSEs until the end of March.

The number of homeowners who are strategically walking away from their mortgages is up to 10% this year. We also have the percentage of home ownership to the general population back to slightly below the year 2000 levels. Recall the overall population is increasing about 2.3 million each year.

Note we might have $448 billion in GSE losses, $48 billion more than estimated just last month.

New Home Sales for December 2009 were 7.6% below November. Bear in mind there is an $8000 tax credit for first time home buyers plus a $6500 dollar tax credit for existing home buyers. These expire at the end of April 2010. The first tax credit expired at the end of November 2009. We also have actual rates low with no end in sight at least in signaling of the Fed rate.

Foreclosures for next year estimates vary, but seem to solidify at 3 million. 2009 foreclosures were estimated at 2.8 million. –more

Technorati Tags: Fannie Mae, Freddie Mac, Real estate, U.S. Housing Market

Dec 10

Foreclosures Are Down But Not Out

Foreclosures No Comments »

Image by respres via Flickr

Foreclosures were down last month, which is good for the housing market, but there are still plenty of foreclosures to choose from. These articles shed some light on what is going on.

November Residential Foreclosures Down for Fourth Straight Month

(IRVINE, CA) — The monthly foreclosure numbers are dropping, but they are still high compared to 2008, reports Irvine, CA-based RealtyTrac.

The company’s newest data released today shows foreclosure filings — default notices, scheduled foreclosure auctions and bank repossessions were reported on 306,627 U.S. properties during the month, a decrease of nearly 8 percent from the previous month but still up 18 percent from November 2008.

The report also shows one in every 417 U.S. housing units received a foreclosure filing in November. –more

Foreclosures Imminent with many Homes in Negative Equity

The US housing market is still in the throes of a crisis. As long as unemployment remains at a high of 10 per cent and people lose jobs thick and fast, defaults on mortgage payments will remain. Hence, foreclosures have become common. There is a section that feels that the housing market is improving. However, the managing partner at AAA Home Rescuers, Mandy Peacock, loves to disagree. Her company modifies mortgages. In fact, Peacock typifies the crisis being faced by homeowners.

She had bought a condo in Las Vegas three years ago at a price of $250,000. She borrowed the entire amount at the interest rate of 12 percent. When the economy hit the trough in 2007, she realized that she was paying more for the condominium whose value had dipped. She is now planning to sell the property at a price of $49,000. Peacock says that she is an optimistic person but she is realistic too.

If one report is anything to go by, then 23 per cent of mortgage holders are in negative equity, which means that they owe more than what their homes are worth. The section, whose homes are “near negative” equity have jumped up to 28 per cent. These are homeowners who do not even have five percent equity in properties they own. –more