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Tuesday, May 12, 2009
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21 comments:
Bloomberg options for end-game for Fannie and Freddie. In this terribly non-informative article, they claim that just about every possible option for how Fannie and Freddie could look after they're less critical to the continued stability of the US and global economy is on the table, including dissolution.
Options for overhauling Fannie Mae and Freddie Mac, the government-run mortgage-finance companies, may eventually include liquidating their assets, according to an analysis released today by the Obama administration.
...
Alternatives range from “a gradual wind-down of their operations and liquidation of their assets,” to returning the two companies to their previous status as government-sponsored enterprises that seek to maximize shareholder returns while pursuing public-policy goals, according to OMB’s analysis of President Barack Obama’s proposed federal budget.
That all options are on the table, now, years before any of these actions would be tenable is interesting, and shows something about the openness to new ideas of our current administration, but it's hardly indicative of what tack will be taken.
Pretty good take on the market:
2009 Housing False BottomNot well written, but the point is pretty dead-on. It even mentioned the similarity between this market's manipulation in inventory (refer to my little debate yesterday about the obvious market manipulation going on) to that of De Beers and diamonds.
Thanks for posting the articles, Cara and Kevin.
The only problem with the "false bottom" scenario is the underlying assumption that those vacant homes will be released onto the market at a greater rate than they are now (i.e. creating an oversupply and driving down prices). No one knows if that will be the case or not.
Very well could be that we will continue to see the same thing we have seen the last 18 months - steadily decreasing inventory, story after story of a large "phantom inventory" that cannot be substantiated, but everyone still assumes will someday be released in large amounts, and steady prices.
IMHO - its just as plausible that the vacant homes will become available slowly over time, not driving down prices, but keeping them from rising either. As someone noted yesterday the banks know that by keeping these homes off the market, they are setting a floor, why would they do something that would destroy that floor?
As the piece notes, DeBeers has been manipulating the market for diamonds to keep prices up. The point though is theyve been doing it successfully for over 30 years and I see no sign of that stopping soon.
Diamonds don't rot? Or get flooded?
Yesterday's income discussion was interesting. There are no doubt some very wealthy people in NoVA, some even on this blog. Heck, by most standards I'm wealthy.
But as was discussed without being mentioned as a real topic is that income isn't the single most important aspect in these decisions: it's what we do with the income--as well as what we expect from that income in the future.
If a person/family is living paycheck to paycheck, they don't make good homebuyers. And people who expect their incomes to decrease will look at cheaper homes in-line with future expected income, rather than more expensive homes.
I think more people, even in this area, fear future income decreases than have been fearful of that in quite a long time. Typically we assume inflation will carry our salaries up. Maybe not so much right now.
And novahomeguy has some pretty maps up on his page... Take a peek.
Maps of declines and median "values"
Cara,
No, and homes do. They also get demolished in other fashions. Ala CR's video posts a few days back. That's one way to reduce supply, and help prop up prices.
Diamonds don't have substantial property taxes and HOA/condo fees. I don't know much about how these banks operate/profit, but I cannot imagine that the years of unavoidable costs and deteriorating conditions will be less costly than depressing the overall market another 10 or 20% and selling the houses asap.
I agree Kevin - the point I was making is weve been hearing about this for a long time and nothing has changed. There is also the possibility that they ARE clearing the vacant homes and we are just missing it. Heres the story of the last year:
Spring 08 (18,000 listings) -- "inventory isnt really declining -- banks are holding them off the market -- Just wait -- more inventory coming".
Fall 08 (15,000 listings) -- "inventory isnt really declining -- banks are waiting on a bailout, but it aint coming -- Just wait -- more inventory is coming"
Winter 08 (13,000 listings) -- "inventory isnt really declining -- banks are instituting forecflosure moratoriums -- Just wait -- more inventory is coming"
Jan 09 (11,500 listings) -- "inventory isnt really declining -- the banks are just waiting for the moratoriums to end -- Just wait -- more inventory is coming"
March 09 (10,000 listings) -- "inventory isnt really declining -- the moratorium has ended and banks are gonna ramp back up again -- Just wait -- more inventory is coming"
Today (8700 listings). "Banks cant do this forever -- just wait -- more inventory is coming."
The rationale for why "more inventory is coming" changes over time, but the results do not. Despite every assurance that more is coming, inventory keeps declining. The calls started at 18,000 listings, as if this was too low -- it needs to be higher!!
Now we have 8,700 listings left. When do we (collectively) decide, maybe the inventory is not coming back?
Anonymous,
All the inventory in the world is irrelevant if it's not priced right. I'd put half our current listed inventory in that category of not really a part of the available market.
As CRT has been saying all along, inventory will shrink, and as Calculated Risk has been saying for years, transaction volumes will shrink dramatically during the long-slow-flat period following this bust.
But what good is inventory that's priced above what I am willing to pay? No good at all. So what we're really all waiting for is when the remaining inventory all scrunches down in to the bottom layers of the price range (as appropriate for whichever region you're looking at).
But I for one, am not holding my breath for another tidal wave of REO properties in my price range, much of the REO's to come will be sprinkled amongst all price ranges, and the bulk of the cheap REOs will be sold in bulk to investors who can cash-flow them to pay for their upkeep and taxes while still making a profit.
If prices in Burke drop no further, so be it. I'll still be better off building up a larger downpayment before buying. (for now anyway). We will be ahead of most of the nation in our housing recovery (due to the relative strength of our local job market), hence we'll get a longer period of time with these low rates combined with bottom prices during which to buy, before the fed allows them to go up, because that's a national scale decision.
That doesn't mean those reasons aren't true. There was a foreclosure moratorium. There have been govt-backed refi programs and homeowner bailouts. There is a surge of buyers out there now.
Considering the goal of the govt and fannie/freddie was to stop this mess and reduce inventory, I'd say that the results here are no big surprise.
But just because they've been successful so far doesn't mean they will continue to be, or that the cost to do so is worthwhile. This has all been at the price of mounting assets. If they see prices starting to tick up, maybe that'll prompt them to let some more go.
TBW,
Burke Centre, like Reston, has community pools that you can buy a membership to even if you don't live in one of the Burke Centre neighborhoods. (Remember to pronounce is cen-ttrrah, okay, so only I do that).
tbw,
I don't know, because it copycatted Reston? Because it doesn't have a metro and never will? As my friend at work who lives there says of it, they took all the good parts of the Reston Community Association and dropped the useless ones (like only allowing 2 kinds of outdoor lamps). But he is biased.
Anybody here need move-in ready in Burke for under $270k and willing to deal with a short sale? It's a TH, in a complex I find a bit tight, but 1400 sq ft and very nicely finished based on the pictures.
Ask, and I'll post the FX*, I'm not posting it now to avoid starting a bidding war unnecessarily. But there's a fixer-upper REO down the street for the same price, so if you need move-in ready at discount prices, short-sales may be the way to go.
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