Fannie Mae, Freddie Mac's Role In The Perfect Real Estate Storm

[midwayer]

"As for how bad it will get, my bet is on 30-percent declines in all the hot markets, i.e., both coasts and miscellaneous high-tech centers in the middle. This assumes that the Fannie and Freddie hedge funds don't bring down the entire system when the cycle goes into reverse. (As an economist, I cannot possibly see how Fannie and Freddie can be fully hedged when 1) they directly or indirectly guarantee more debt than the U.S. Treasury, 2) they are leveraged many times more than the commercial banks, and 3) the only conceivable counterparties for Fannie's and Freddie's derivatives (JP Morgan, Merrill, Citi, etc.) would logically be on the same side of the book as Fannie and Freddie.) If the systemic risk that Fannie and Freddie have created comes true, then I have no idea how bad housing will get.

"It would be catastrophic."







http://realtytimes.com/rtapages/20040628_fanniefreddie.htm

[2Design]

1. thanks for posting

[librechik]

2. eeek

pls, somebody convince me this won't happen...

[midwayer]

4. Would take

some time to play out, but it sounds like the signs are ominous

[Sugarbleus]

3. Well that clears up some of my questions on why

Housing is so out of reach for so many. That's all I ever wanted in life--a home of my own. It will never happen. This will trickle down to all sorts of housing investmenst and put everyone in dire straights.

Thanks for the sad post. :grr:

[Corgigal]

6. Well that is when you buy

in 10 years, or maybe less, the housing market is going to be down 30 percent and that would be the right time to purchase. I'm lucky that I own my house and I know right now it's over priced. I'm not wanting to sell right now even with that expected gain because the thought of renting for a few years with my family isn't worth it. Yeah yeah, I lost thousands in equity but I always think I bought the house for 80,000 and I'm happy if I just get about what I bought her for. Sometimes you buy a house to live in and not expect a giant gain.

I might purchase another home in a few years when the prices fall.
I will just watch and see. You should do the same.

[ender]

5. 30%??!?!

if home prices collapse 30%, anywhere outside of LA, Silicon Valley, and the NoVa area, I'll be incredibly surprised...