Best of the Week
Most Popular
1.UK General Election BBC Exit Polls Forecast Accuracy - Nadeem_Walayat
2.UK General Election 2017 Seats Final Forecast, Labour, Conservative Lib-Dem, SNP - Nadeem_Walayat
3.UK General Election 2017 Forecast: Conservative 358, Labour 212 Seats - Nadeem_Walayat
4.Theresa May to Resign, Fatal Error Was to Believe Worthless Opinion Polls! - Nadeem_Walayat
5.UK House Prices Forecast General Election 2017 Conservative Seats Result - Nadeem_Walayat
6.The Stock Market Crash of 2017 That Never Was But Could it Still Come to Pass? - Sol_Palha
7.[TRADE ALERT] Write This Gold Stock Ticker Down Now - WallStreetNation
8.UK General Election Results Map 2017 vs 2015 vs Opinion Polls - Nadeem_Walayat
9.Orphaned Poisoned Waters,Severe Chronic Water Shortage Imminent - Richard_Mills
10.How The Smart Money Is Playing The Lithium Boom - OilPrice_Com
Last 7 days
Gold Back With A Vengeance As Bitcoin Bubble Bursts - 26th Jun 17
Crude Oil Trade & Nasdaq QQQ Update - 26th Jun 17
Gold and Silver Ongoing Consolidation May End Soon - 25th Jun 17
Dollar May Become “Local Currency of the U.S.” Only - 25th Jun 17
Sheffield Great Flood of 2007, 10 Years On - Unique Timeline of What Happened - 24th Jun 17
US Stock Market Correction Could be Underway - 24th Jun 17
Proof That This Economic Recovery Narrative is False - 24th Jun 17
Best Cash ISA for Soaring Inflation, Kent Reliance Illustrates the Great ISA Rip Off - 24th Jun 17
Gold Summer Doldrums - 23rd Jun 17
Hedgers Net Short the Euro, US Market Rotates; 2 Horsemen Set to Ride? - 23rd Jun 17
Nether Edge By Election Result: Labour Win Sheffield City Council Seat by 132 Votes - 23rd Jun 17
Grenfell Fire: 600 of 4000 Tower Blocks Ticking Time Bomb Death Traps! - 22nd Jun 17
Car Sales About To Go Over The Cliff - 22nd Jun 17
LOG 0.786 support in CRUDE OIL and COCOA - 22nd Jun 17
More Stock Market Fluctuations Along New Record Highs - 22nd Jun 17
Understanding true money, Pound Sterling must make another historic low, Euro and Gold outlook! - 22nd Jun 17
Green Party Could Control Sheffield City Council Balance of Power Local Election 2018 - 22nd Jun 17
Ratio Combo Charts : Hidden Clues to the Gold Market Puzzle - 22nd Jun 17
Steem Hard Forks & Now People Are Making Even More Money On Blockchain Steemit - 22nd Jun 17
4 Steps for Comparing Binary Options Providers - 22nd Jun 17
Nether Edge & Sharrow By-Election, Will Labour Lose Safe Council Seat, Sheffield? - 21st Jun 17
Stock Market SPX Making New Lows - 21st Jun 17
Your Future Wealth Depends on what You Decide to Keep and Invest in Now - 21st Jun 17
Either Bitcoin Will Fail OR Bitcoin Is A Government Invention Meant To Enslave... - 21st Jun 17
Strength in Gold and Silver Mining Stocks and Its Implications - 21st Jun 17
Inflation is No Longer in Stealth Mode - 21st Jun 17
CRUDE OIL UPDATE- “0.30 risk is cheap for changing implication!” - 20th Jun 17
Crude Oil Verifies Price Breakdown – Or Is It Something More? - 20th Jun 17
Trump Backs ISIS As He Pushes US Onto Brink of World War III With Russia - 20th Jun 17
Most Popular Auto Trading Tools for trading with Stock Markets - 20th Jun 17
GDXJ Gold Stocks Massacre: The Aftermath - 20th Jun 17
Why Walkers Crisps Pay Packet Promotion is RUBBISH! - 20th Jun 17

Market Oracle FREE Newsletter

The MRI 3D Report

Fannie Mae Advertising Foreclosed US Homes to the Brit's

Housing-Market / US Housing May 15, 2008 - 12:22 PM GMT

By: Adrian_Ash

Housing-Market

Best Financial Markets Analysis Article"...'Find a holiday home in America ,' shouts Fannie Mae across the Pond..."

YOU CAN'T BLAME Fannie Mae for trying. Last year saw British property buyers snap up around 20,000 homes in the United States .


Flush with British Pounds at a 27-year high against the Dollar, they poured something like $4.6 billion into US real estate according to data from the Association of International Property Professionals (AIPP).

Now the Pound's slipped back, but so too have Florida house prices. So cue Fannie Mae to target British holiday-makers.

"Homes Available in USA ," says a Google advert – visible only to web surfers inside the UK it would seem – from the US-government backed mortgage agency.

If you're inside the fifty states, most likely you won't find it. Which would only be tactful.

"Affordable housing opportunities," says the ad. "Find a holiday home in America ."

There are plenty of "holiday homes" to choose from in the USA right now, not least on Fannie Mae's books. Single family homes in Miami , Florida , for example, start at just $45,000. The last time a first-time buyer in Britain could snap up a starter home for that price – around £23,000 – was 1991.

Even then they had to buy far outside the "hot spots" of London and the South-East. At least 150 miles away, in fact. The last reported sighting of a London home costing less than $50,000 equivalent was back in 1985. Today the average apartment in the UK capital costs six times as much.

But hey, that's inflation for you! And flicking through the huge range of cut-price real estate now on sale at Fannie Mae today, three things about the decade-long inflation in real estate prices now imploding on both sides of the Atlantic continue to amaze us here at BullionVault.

First, the sheer volume of foreclosures sweeping the former hot spots of America . Second, the size of house price "discounts" about to hit the United Kingdom . And third, how-in-the-hell anyone ever thought subprime mortgages sounded like a good idea.

As the chart above shows – courtesy of Janet Yellen of the San Francisco Federal Reserve – late payment rates on subprime US mortgages stayed above 9% even when the cost of borrowing sank to a four-decade low (and stayed there) between 2002 and 2005.

Teaser rates of just 1% interest, in other words, left almost one-in-ten subprime borrowers unable to meet their monthly mortgage bills. So the profits assumed by "resetting" those rates to 7% and above two years down the line were never going to show up.

As in not ever. Any bank day-dreaming otherwise deserves euthanasia, let alone bankruptcy.

What they're getting instead, however, is a fresh dose of money from the Fed. The US central bank is actively creating a market in mortgage bonds, accepting these illiquid assets as collateral against loans of highly liquid US Treasury bonds.

Will the money thus released to the banks find its way back into US house prices? Whatever happens on your street in 2008, subprime lending as a financial product is dead – if not for good, then at least for now. Issuance of residential mortgage-backed bonds collapsed by 95% during the first three months of this year, according to data from SIFMA, the securities association. The futures market expects a further 25% drop in US house prices, notes Janet Yellen of the Fed, based off the price for Case-Shiller index contracts.

And now the UK property crash has finally turned up as well – a mere three years after everyone thought it would – the chances of British holiday-makers supporting the Florida real estate market look pretty slim too, despite Fannie Mae's advertising dollars.

By Adrian Ash
BullionVault.com

Gold price chart, no delay | Free Report: 5 Myths of the Gold Market
City correspondent for The Daily Reckoning in London and a regular contributor to MoneyWeek magazine, Adrian Ash is the editor of Gold News and head of research at www.BullionVault.com , giving you direct access to investment gold, vaulted in Zurich , on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2008

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Adrian Ash Archive

© 2005-2017 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Comments

eli
18 May 08, 14:47
florida homes

There are plenty of "holiday homes" to choose from in the USA right now, not least on Fannie Mae's books. Single family homes in Miami ,


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife