Tuesday, December 29, 2009

The Federal Government Acknowledges Housing Crisis is Deepening, Throws $$$$$$ At Fan & Fred

This blog detailed the condition of the national housing crisis in a recent postAnd then on Christmas Eve, with no Congressional oversight, everything changed.

Santa Claus made an unannounced stop at Treasury, and naughty Tim Geithner was apparently so happy to see him that he wrote Fannie Mae and Freddie Mac BLANK CHECKS.  These entities currently own or back the majority of US mortgages, and are  bleeding cash and facing further losses. 

The "bad" news?  This is the federal government's acknowledgment of how deep and wide the housing crisis still is: expect the economy and housing to get worse before they get better.  

The "good" news?  This is the BAILOUT FOR THE AVERAGE JOE, more than a year after the Wall Street "Too Big To Fail" banks got theirs. 

Estimated cost:   $1,000,000,000,000.00Over a Trillion $.  Taypayers' money, natch. 

Here's the vital reading: 

WSJ: US Takes Cap Off Fan & Fred Bailout (with nearly 200 comments)
Calculated Risk: Update on How Government is Supporting Housing - Lists Programs 
Fannie and Freddie's Home Inequity
Dean Baker: Fannie and Freddie: Just a 4-Letter Word 
Analysts Say F&F Will Buy Delinquent Mortgages Out of the Securities They Hold 
Fannie's Mortgage Holdings lost 26% of value in November

RealCentralVA post on the issues here.  Don't miss the brief overview on the local market.

9 comments:

craigger said...

Citizens, the real value of your money is being destroyed. Home prices are in nominal dollars, and the Govt is doing its best to keep those nominal prices high. No rational thoughts pertaining to housing in regards to supply / demand or affordability can fight the low marginal cost of printing dollars. 30 year mortgage holders can rejoice in their fixed nominal dollar payments.

That last bit was supposed to be positive, but did i mention that the F&F CEO's got paid 4-6 million last year? Loosing 200B over the next 3 years is a job I'm sure most anyone could qualify for.

amen said...

re: 30 year mortgage holders can rejoice...exactly.

but if you need to refi, do it now. Rates are only going up.

For first time homebuyers, rates are less relevant. There's only so much the buyer can afford, especially in this area. Rates go up = prices go down. They're still coming down in this area.

Real C'ville - The Bubble Blog said...

New $3.5 Billion Bailout to GMAC, to be announced Wednesday...pennies compared to F&F (via CR).

Re Craigger and CEO compensation, a frequent commenter emailed this:

http://www.zerohedge.com/article/what-are-we-stupid

Re Amen & mortgage rates rising and "affordability": Calculated Risk points out the problem w/buying a house now at 5% but selling in 4+ years in a 7% mortgage market...making buying and holding for lotsa years, or expecting a loss, the "norm" in many cases:

http://www.calculatedriskblog.com/2009/12/are-homes-now-cheap.html

RvR said...

The BubbleBlog story here mentions RealCentralVA's overview of the market. I look at it and see an obvious problem. I have come to think unfavorably of Duncan, so will post here instead.

He marks Nov. 08 as a "statistical anomaly." That's silly. It's clearly not, according to his own chart. There's increasing inventory through January 09 -- and then inventory stays at historically high levels through the spring months.

One could refashion the chart to show 48 months reading from left to right without repeat. But you already get the picture!

Jim Duncan said...

Reluctantly, I respond to the "I have come to think unfavorably of Duncan ..." and will ask why. I'd welcome constructive criticism that will help me do what I do better. Jim@RealCentralVA.com.

But also I'll respond (as I did on my post):

My reasoning for marking that as a statistical anomaly (and maybe should have had a ? after it) was due to the spike from 18 to 25 months of inventory from October to November 2009. And then 19 to 32 months ... I just can't explain the spikes, and that is my reason for questioning them. (Further, I don't trust the MLS data 100% - probably closer to 75% due to user error and manipulations with new construction and such.)

You don't have to agree with me, or even like me, but I'm not hiding anything and welcome discussion and conversation - it's how I (and we) learn.

Real C'ville - The Bubble Blog said...

RvR, In regard to months of inventory, there's more available than reflected on the MLS or that graph.

For example: we noticed that between the 31st of Aug/Sept. 1, 30 Sept./Oct.1, Oct. 31/Nov. 1 the numbers of available properties on mycaarDOTcom changed overnight, dropping in tens or 100's each time as listings expired. (Might even still have screen shots of these numbers).

Add foreclosures and short sales...2010 will continue the high level of available inventory compared to qualified buyers.

As for Jim, this blog is fond of/has respect for the man (as he appears in cyberspace!) and the blog. We, too, are wondering what you're disagreeing with...encouraging you to write to him, as he asks, or go ahead and post a disagreement w/stats or graphs....

His posts lately have been ones that could appear here... in the past week there's been material about foreclosures, walking away, the Fan/Fred bailout, some huge price reductions, Biscuit Run....

Real C'ville - The Bubble Blog said...

More about why the $200B each was uncapped, and the Christmas Eve timing, from Calculated Risk:

http://www.calculatedriskblog.com/2009/12/fannie-freddie-changes.html

Anonymous said...

An article from the NY Times says that the government's intervention into the housing market is making things worse. Taxpayer money is used to support those who made bad choices and worse, that same money is pricing people out of the market who didn't make stupid choices three years ago.

U.S. Loan Effort Is Seen as Adding to Housing Woes
http://www.nytimes.com/2010/01/02/business/economy/02modify.html?hp

Real C'ville - The Bubble Blog said...

That's a great link from the MSM. The accompanying graphic is telling. The "Paper of Record" is finally reporting what analysts and econ bloggers have been saying for months....see Dean Baker, Calculated Risk, Naked Cap, Mish....

NYT ran this article on a Saturday. Maybe because they've had editorials in support of the Obama Mods? Monday of a new year would have gotten a bigger immediate readership.