Tiberias Properties Blog: Canoeing Through The Housing Market

In a recent article published November 7^th, 2011 by PMAR(Portland Metropolitan Association of Realtors), Phil Querin of Querin Law, LLC writes about Fannie and Freddie and how both GSE’s (Government-sponsored enterprises) have “come under government ownership and control” recently.

Phil goes on to say that since the collapse in 2007-2008 of the private secondary mortgage market, “there is no viable buyer of residential loans except the federal government. The question that is now being asked is when will GSE loans be shifted to the private sector?

The good news, it is happening. The fact that the slowly developing private secondary market will want to offset additional risk assumed by taking on Fannie and Freddie loans is no surprise. Higher rates can be expected on such loans.

The higher rates could be co-related to the elevated levels of REO inventory. The balance sheets of Fannie and Freddie continue to be poor. In an article published on November 3^rd, 2011 by housingwire.com, Jon Prior writes “At the same time Freddie unloaded the 25,300 REO (Real Estate Owned), it repossessed another 24,300 homes back into the inventory.” If the market were to continue on this road, the GSE would reduce 1,000 REO’s from inventory every quarter and it would be close to 15 years before the glut of inventory is eliminated.

Even with a glut of REO’s, the homeownership rate increased in the third quarter unexpectedly. In an article posted on DSNEWS.com on 11/02/2011, Krista Franks states “the .04 percent increase, which brought the homeownership rate to 66.3 percent for the third quarter, was not enough to post an annual increase.” Click here to view the article in its entirety.

The bottom line, the housing market is slowly coming back. Fannie and Freddie are slowly releasing loans into the private secondary market. Investors can expect a higher rate of return due to more risk.

For those of us fortunate enough, recently in Portland, to have been able to sit down and absorb John Mitchell’s “Economic Forecast 2012” we now know that the U.S.A. is at risk of a 2nd recession from any number of small events, nationally or globally that ripple back to the streets of main street. My proposals, keep your lifejackets on, oars in the water, and watch for any changes in the wind or ripples in the water.