Housing Emperor Exposed


By Logan Mohtashami
Benzinga Columnist
December 14, 2011 1:23 PM

Can we now finally admit the Housing Emperor has no clothes?

Claims by Housing experts that the residential real estate market has bottomed are a cloak with no substance.

For the last year my constant drumbeat has been that we do not have enough qualified buyers (excluding cash buyers) to absorb the true massive housing inventory. Just recently the NAR has come out and said they have to revise their home sales numbers going back to 2007. Here is the Truth: We have a very manipulated and artificially propped up housing market. You can deduce from the facts what you will. But, as John Adams once said, “facts are stubborn things.”

  1. The US government has spent trillions of dollars to bring mortgages rates down to spur home buying.
  2. The US government has created programs like the home buyer tax credit to get people to buy homes and take advantage of historically low interest rates. A new bill sponsored by Senator Chuck Schumer would incentivize foreign buyers to purchase a primary residence as a path to legally live in the United States.
  3. The banks and Freddie and Fannie have avoided flooding the market with distressed homes in efforts to avert a further drop in home prices. This strategy on their part is understandable, but nevertheless has kept prices propped higher than market forces would normally bear.
  4. Many institutions have created some type of a loan modification to prevent home owners from foreclosing or being part of a short sale, thereby keeping troubled inventory off the market. However, loan modifications have a high redefault rate so the likelihood of these homes ending upon the market is high and looming ahead.

These are just some of the actions taken by the Federal government and banks to prop up home prices, manipulate inventory numbers and prevent future foreclosures.

Yet, in spite of all these actions, home prices still double dipped in 2011.

Think about that. Trillions of dollars spent to bring mortgage rates to near all time lows, manipulation of home inventory numbers to prevent flooding the market with distressed properties, government tax breaks for buying homes, loan modifications to prevent foreclosure, and yet nothing has really worked.

So you tell me: is the Emperor really wearing fine clothes?

Logan Mohtashami is a senior loan officer at his family owned mortgage company AMC Lending Group, which has been providing mortgage services for California since 1988.

Read more: http://www.benzinga.com/general/politics/11/10/2023277/ows-banks-democrats-obama-and-money-that-really-talks#ixzz1gXkNiouFRead more:

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5 thoughts

  1. right on Logan.
    Govt lying is preventing chaos. And they don’t want an overthrow of govt nor chaos.
    2012-2013 foreclosures may create true chaos in inner cities; bpo’s and inspections for banks are climbing as banks try to figure out their true Asset value vs non-performing assets.

    1. Frank, it still amazes me even to this day people believe that there is a true market price with all this intervention. The numbers I have are that 10-15 million homes need to be foreclosed on or be part of a short sale in the next 5-10 years and at some point in that time frame interest rates on the short and long side will be higher. So, at some point the trillions of dollars the Fed spends to keep rates low will come to an end. Hopefully by that time frame this country’s true massive inventory will have come down. However, so far we haven’t seen much of a dent with all that has been done. Time will tell and who knows what the Government,Banks, Freddie and Fannie will do next.

  2. In following the comment about drug use and abuse being on the rise……..

    In my 3 county area, there was more than 100% increase in drunk driving arrests over christmas/new years, and that is with less officers involved in emphasis patrols due to budgtary constraints.
    92 drunk motorists arrested this year -vs- 43 last year.

    Other crimes, in my sleepy neck of the woods in central WA, seems to be exploding the last year or so, especially the drug related kind.
    Economically related? I don’t doubt for a minute.

    1. To your point there has been many historical cases showing that a economic recession can cause a higher rate of crime. In the US, due to a lack of discipline on financial planning, there has been many areas where budget constraints have affected the day to day lives of Americans.

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