The idea of this blog was to be a resource for buyers. This first week of August gave us a lot of information about the effect the tax credit had on the housing market. Many claim that the housing market has stabilized. That may be true, but the second half of that is how to finance your home purchase.
You may have noticed all the sold signs around your neighborhood, or other neighborhoods. Properties are selling while the financing is becoming harder to get. The problem is no one wants to be stuck with the loan. Loan Originators want loans that they can sell and the secondary market is a mess.
Fannie Mae was charged with buying loans, and FHA became a primary funding source. Two things happened recently that will change that. Number one is the claim Fannie Mae is broke. The second thing is that the Wall Street Reform Bill made derivatives a more open target. William Buffet is now in the news as taking losses on his derivative portfolio, by last report 40%.
In Real Estate bad news is good news, and good news is bad news. What this means, in my opinion, is that investor groups may take up mortgages as secured investments.
Banks now control a lot of housing inventory. By default, many mortgages are reverting back to banks. What this does is bring property pricing back in line with value. Banks can make profit in a lot of ways. Derivatives were an insurance against losses, well, we had some losses. The pool of funds seems to me to be inexhaustible. There are trillions of derivative dollars in the pool.
OK, longer story short, I still think in the next three months that the Real Estate market will settle in to be financed, be more affordable, and have a chance for some future appreciation of the right properties.
