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OpEdNews Op Eds    H1'ed 5/4/13

The Housing Shell Game: Prices Up, Ownership Down

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For the last year or so, prices have been driven by low rates, inventory suppression, and a surge in investment. In the hotter markets, investors have accounted for more than 30 percent of all sales. But that won't continue through 2013, mainly because yield-seeking speculators are not making the money they figured they would buying up bank-owned properties (REOs) and renting them out. As analysts at Goldman Sachs recently pointed out: "Rental yields on single-family homes, conditional on the current market prices, are compressed. Even among the 10 metro areas where our estimated 2013 rental yields are the highest, the average rental yield is only 5%."

So, even the best deals are only netting 5 percent. That's not enough to wet the beak of the big players who thought they'd be raking in the moolah. Now that the price of distressed properties has skyrocketed, the Wall street guys are going to make even less, which means they'll probably reduce their spending on housing and move on to more lucrative areas of investment. It might not happen tomorrow, but -- as prices go up and profit margins narrow -- it will happen. And that will leave the banks in the same situation they find themselves today, with millions of distressed homes in the pipeline and a dwindling pool of buyers.

Now take a look at this blurb from Moody's Ratings agency that conflicts with the Census Bureau report, but sheds a little light on what's going on behind the scenes:

"Nationally, the market holds about 3 million homes in serious delinquency or foreclosure -- which is about 3 times the normal level, according to Moody's.

[...]

"Almost 40 percent of delinquent loans have been delinquent for three or more years, which translates to much greater losses than on loans in delinquency for shorter time periods." (Moody's: Home Prices to Increase, Loss Severities to Remain High, DS News)

See? It's all a big shell game. Nearly half of "the delinquent loans have been delinquent for three or more years," and yet, the banks haven't foreclosed. Why is that? It's because they want to suppress inventory to prop up prices.

On top of that, the banks have enlisted Obama to provide them with a stealth bailout via home modification programs to keep underwater homeowners out of foreclosure until the banks are ready to take action. Take a look at this eye-popper from DS News:

"Starting July 1, large numbers of non-paying borrowers will have the opportunity to modify existing mortgages through a more streamlined process.

"According to the Federal Housing Finance Agency (FHFA), Fannie Mae and Freddie Mac will offer 'a new, simplified loan modification initiative' to borrowers who are at least 90 days late with their mortgage payments. Modifications can include a lower rate, a loan term stretched to 40 years and principal forbearance in some cases.

"'The loan,' says FHFA, 'must be owned or guaranteed by Fannie Mae or Freddie Mac. Homeowners must be 90 days to 24 months delinquent, and have a first-lien mortgage that is at least 12 months old.'

"FHFA says the 'key difference is that borrowers will not be required to document their hardship or financial situation, but will be able to accept a Streamlined Modification Offer by simply making the trial period payments and agreeing to the terms of the modification... the bottom line is that documentation is no longer required.'" (DeMarco Disappoints with New Streamlined Mod Program, DS News)

Doesn't this prove that Wall Street "owns" Obama? Just think about it: "No doc" refis for underwater borrowers who have not made a mortgage payment for two years? And President Dumbass wants the US government to guarantee these loans? Have you ever heard of anything more ridiculous in your life?

This is why housing prices are going up, because corrupt, carpetbagging public officials and their price-fixing allies at the Fed have moved heaven and earth to do the banks' bidding and to make sure they don't lose one red cent on their garbage stockpile of distressed homes.

The whole system is a joke.

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Mike is a freelance writer living in Washington state.

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