Second housing bust on the way

[Tempest]

http://www.bloomberg.com/apps/news?pid=20601087&sid=aw4.u4ryoAq0&refer=home
Quote:
April 21 (Bloomberg) -- Fannie Mae and Freddie Mac mortgage delinquencies among the most creditworthy homeowners rose 50 percent in a month as borrowers said drops in income or too much debt caused them to fall behind, according to data from federal regulators.

The number of so-called prime borrowers at least 60 days behind on mortgages owned or guaranteed by the companies rose to 743,686 in January, from 497,131 in December, and is almost double the total for October, the Federal Housing Finance Agency said in a report to Congress today.

Of all borrowers who ended up in default, 34 percent told Fannie and Freddie they were earning less money, about 20 percent cited excessive debt as a reason for missing mortgage payments, and 8.1 percent blamed unemployment, FHFA said.

Fannie and Freddie are the largest U.S. mortgage-finance companies, owning or guaranteeing 56 percent of all U.S. home loans. Regulators seized Fannie and Freddie in September and forced out top management after examiners said the companies’ capital may be inadequate to weather the worst housing market since the Great Depression.

I wonder if the Freddie CEO got sight of this and it was just too much?

 

[buster]

Not good.

 

[RWEST]

Things sure don't look good...

And, nobody seems to know which end of the dog to kick. I just got a newsletter from my financial 'guru' yesterday saying that 'in our opinion, the housing industry is beginning to rebound'. Yeah, right, while my $$$$ continue to evaporate. Shoulda' bought T bills.

 

[Turk]

We had our dead-cat-bounce.

 

[hate2work]

Originally Posted By: tpitcher
We had our dead-cat-bounce.



This would be funny if it wasn't true.

 

[Drew99GT]

Originally Posted By: RWEST
Things sure don't look good...

And, nobody seems to know which end of the dog to kick. I just got a newsletter from my financial 'guru' yesterday saying that 'in our opinion, the housing industry is beginning to rebound'. Yeah, right, while my $$$$ continue to evaporate. Shoulda' bought T bills.

The problem with T-Bills is that because the govnmt is bailing everyone out, and they're talking of a govnmt run insurance company now to back muni-bonds, T-bonds will have every facet of leverage in the market place included in them! So they're getting to be just as risky as everything else.

 

[Tempest]

Quote:
they're talking of a govnmt run insurance company now to back muni-bonds

In order to lower interest and insurance costs on them. Fannie Mae and Freddy Mac all over again...

 

[oilyriser]

Commodities are still 2x their traditional values. A recession that was caused by energy and subsequent commodity shortages cannot be reversed by easing credit. Dramatic drops in consumption are needed. Amish, anyone?

 

[Amkeer]

Things are getting alot better folks. Those that want to make substantial money need to ignore the bad news, other than the fact that when things are the worst that is when the rewards are greatest. Not everyone can win, so you need to chose what side you are going to take. Case in point. When everyone was selling stocks we were buying. We are now up substantially. We believe it is a great time to buy real estate.

We have also managed to buy a truck, and boat at substantial savings. The downfall is the boat prevents me from working, and making money.

 

[PandaBear]

I'm working with my friend to buy an apartment complex together. A former $880k 2 story complex (2-4 units, configurable, 3500 sq ft total living space) was renting out for $4k per month, now foreclosed and the bank is trying to get rid of it for $390k, and the rent is still around $3.5k per month.

Just need to work through the details, and seems like a good investment.

 

[Gary Allan]

While short term bargains are there in real estate, it's an assured loser starting somewhere in the next 10 years. Unless there's a massive increase in population, there will be too much housing available for those who seek it. The early boomers didn't have enough kids.

 

[PandaBear]

Originally Posted By: Gary Allan
While short term bargains are there in real estate, it's an assured loser starting somewhere in the next 10 years. Unless there's a massive increase in population, there will be too much housing available for those who seek it. The early boomers didn't have enough kids.


We have enough legal/illegal aliens and Chinese tourists to buy up quite a few.

At least in California.

 

[Win]

Originally Posted By: PandaBear
I'm working with my friend to buy an apartment complex together. A former $880k 2 story complex (2-4 units, configurable, 3500 sq ft total living space) was renting out for $4k per month, now foreclosed and the bank is trying to get rid of it for $390k, and the rent is still around $3.5k per month.

Just need to work through the details, and seems like a good investment.


The rule of thumb I always use is to get 10% return on your money on rental property, so it sounds like you are in the ballpark. Apartments are a real PITA, though.

Values are fairly steady around here, but there are pockets of screaming deals. I bought a new (as in, new) house on the lake about 90 miles north of here for less than sixty cents on the dollar replacement cost of the improvements, not even counting the value of the lakefront lot. Cash, of course.

I didn't buy it as an investment though, I just wanted a house on the lake (well, my wife did).

They really need to just put all this stuff on the market for whatever it will bring and be done with it. Make it cheap enough, and somebody will buy it.

 

[Primus]

Originally Posted By: RWEST
I just got a newsletter from my financial 'guru' yesterday saying that 'in our opinion, the housing industry is beginning to rebound'.


Funny guy, your "guru". It seems he was mistaken with All Fools' Day. In fact, with about 640K losing their jobs every week we are just in the beginning of a drop. Besides, it's highly likely "Lenders nationwide are sitting on hundreds of thousands of foreclosed homes that they have not resold or listed for sale", i.e. there is a huge "shadow inventory" that sooner or later will be thrown out to the market:

Housing Bubble Smackdown: Bigger Crash Ahead

 

[Tempest]

Good but scary info. Gov. policies are just throwing money down the toilet.

 

[Win]

I skimmed the linked article and didn't see much there that was new.

Holding a commodity until it can fetch a better price is nothing new, except that empty houses do not store well. The article implies something sneaky is going on, maybe so, but it could just be a business decision to buy low, sell high later. We all aspire to that don't we?

Regardless, the best way to clear the backlog that owners are not willing to sit on, is to recycle them back into the market for whatever their present day value is.

If the price is right, somebody will buy them.

 

[Cutehumor]

I was interested in a 350k house (3500 square foot)foreclosure, but wife won't do it. she thinks people trash foreclosed homes.

 

[oilyriser]

Originally Posted By: Win

They really need to just put all this stuff on the market for whatever it will bring and be done with it. Make it cheap enough, and somebody will buy it.


Unfortunately They have bought the politicians, who then use taxpayer's money to prop up the asset values. Don't own a house yet? Too bad, you're paying to support those who do.

 

[Primus]

Think housing is just a pretext for throwing money down the toilet. Otherwise, it would be less painful to give homes to actual owners free of charge by writing off just $8 trln. If I am not mistaken, this is roughly a total value of all actual mortgages. However, it was already pumped $12-13 trln without fixing the problem and we may expect other $4-5 trln till the end of 2009, and other $5-6 trln annually during next 2 years.

 

[Gary Allan]

Quote:
The rule of thumb I always use is to get 10% return on your money on rental property, so it sounds like you are in the ballpark. Apartments are a real PITA, though.


I don't know if the formula still works, but I used to take the total expenses (everything) and charge it against the rental income. I'd then take that (as a payment into a loan) out over 20 years @ about 10%. Whatever that figure came out to was the value of the property.

That was before you had to make a killing in 5 minutes or it wasn't worth investing in