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It’s been a year since we started talking to people about all things real estate. In Blog Years, that’s 52 interviews, 222 podcasts and 403 posts, on subjects ranging from shadow foreclosures to Federal loan modification programs to environmentally friendly home design.
Today, The Real Story looks at what we’ve learned about the financial side of real estate: the first big lesson being that not only does every story have two sides, but also roots and branches that connect it to dozens of other stories as well, some worthy of headlines and some that would get lost in a big news day. In the last year, we have seen the Federal government step up its participation in the housing market, with the FHA taking on the role of a new subprime source—making loans with only 3.5% down. Needless to say, FHA loans now make up 25% of ALL new mortgages in the country—and HALF of all new home mortgages. By October, when the FHA’s reserves fell to .53%, well below its 2% reserve threshold, Congress stepped in, loan requirements were tightened, and minimum credit scores were raised. John Burns and his associates from John Burns Real Estate Consulting were on Capitol Hill for this news; the full report is in our archives.
Early this year, Representative Barney Frank announced that Fannie Mae and Freddie Mac, privately-owned and taken over by the government in 2008, are “likely to be abolished.” Why? Although they are giants, owning more than $5 trillion in residential debt, they haven’t been able to make it without significant taxpayer aid (to the tune of about $110 billion.) Chris George talked about his view of the government stepping back and letting private industry re-enter this part of the financial market last year; his discussion is still topical.
Stan Humphries, chief analyst from Zillow.com, told The Real Story that there are about 3 million foreclosures in the current market and that one out of every five US households are under water. Currently, there are approximately 500,000 homes in the US whose owners are not making mortgage payments. To put it in perspective, although foreclosures are no longer front page news, more foreclosures are projected for 2010 than 2009 and there are at least 4-5 years of foreclosures in the pipeline.
We have been told that the real estate market has hit bottom and learned to tally what Carolyn Said, real estate and financial reporter from the San Francisco Chronicle, calls “surface signs of stability.” We’ve been advised to keep an eye on the job market, the notices of default, negative equity, increasing interest rates, and to watch what happens to demand as tax credits are withdrawn. We have our marching orders; we’ll be reporting back on all of these issues in the next few weeks.
