Another excellent blog from Mish.
He points to an article from Business Week where they discuss the facts that 90% of the entire mortgage market is being generated from Fannie, Freddie and FHA. That means, in essence, that only 10% are being written voluntarily. Yes, most houses being bought today are being underwritten with money stolen at the point of a gun. Now forget about whether or not you agree with me philosophically about government. This is not good for housing if private companies are not willing to step up and lend to borrowers to buy houses. This cannot be sustained, and when it stops, the bottom will drop out of housing.
Further, FHA loans have surpassed Fannie and Freddie for the first time in history since these loans require little money down. The scary thing about this is many people are buying homes with this with appraisals coming back showing values above their purchase price. They are under the impression they have "equity". As soon as they sign that loan doc, however, their house will be used as the next appraisal. And because there was no or very little money put down, their "equity" will evaporate very quickly and within a year they will be underwater.
Then, of course, as I have mentioned many times, as soon as the government stops paying people to buy homes and buying mortgages (official now as of April 30) this thing will start coming down.
A great quote from Mish:
"Can I ask a simple question: Who does not have a house that wants one and can afford one, and does not need money from the government to buy one, and is not in danger of losing their job?"
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