The Real Estate Bloggers

Fannie Mae and Freddie Mac – OTC or Penny Stocks

Posted: 06 Jul 2010 04:25 AM PDT

Money-house-lady Over the counter or penny stocks is not the place where people put their retirement funds. But years of mismanagement and social engineering have landed Fannie Mae and Freddie Mac in the world of OTC stocks.

Trading under a dollar for too long has gotten these stocks out of the New York Stock Exchange and into the nether worlds of the penny stock trading floor.

There is an irony that what is perceived as the underbelly of the investment world is where Fannie Mae and Freddie Mac are forced to live. The full faith and credit of the Federal Government, who own 80 percent of the two companies now, can not prop the valuation of the remaining 20 percent of shares to over a dollar.

And what makes matters worse, these two companies are providing the liquidity to an already distressed housing market.

But to listen to the politicians in Washington all is fine with the housing market and home buyers have nothing to fear.

I am not so sure of that anymore.

When the guarantor of the housing market is essentially a subsidized federal program, I get nervous.
When the private market does not see any value in lending to home buyers, I get nervous.
When investors see no value in holding mortgages, once seen as the safest investment that many built their retirements around, I get nervous.

We have to remember that the housing market needs to be self sustaining once this crisis is over. The valuation of our homes have to be based upon what the free market thinks they are worth without government subsidies. Tax credits, artificially low interest rates, and other government props do not make a healthy market, especially when the government is running huge deficits.

The politicians, the media, and the National Association of Realtors all can not talk about the problems we have in the mortgage world but the real barometer is how the investment world sees the problem.

By delisting Freddie Mac and Fannie Mae, the financial markets have spoken that the companies that are the underpinning of the housing market have no value to investors.

Thanks for reading this post. If you would like to see more articles like this, please come visit The Real Estate Bloggers. where it was originally published.

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Australian Homes Cost Nearly Twice As Much As USA Homes

Posted: 06 Jul 2010 04:08 AM PDT

Suburbia Remember your first economics class as the professor showed the supply versus demand curve and it seemed such a basic concept?

Well if you need proof that it works, just look at the housing markets in the United States and Australia. Both immigrant countries that have relatively short histories the housing markets differ greatly.

Australia with a much smaller population base has a shortage of housing. The United States after gorging itself on cheap lending and a housing boom has an excess of housing.

In Australia housing prices have been rising and demand far exceeds supply.

In the United States housing prices have been dropping and supply far exceeds demand.

2 similar countries, 2 very different housing markets.

The source of her frustration — a shortage of 200,000 dwellings — is helping fuel Australian home prices, which are 82 percent higher than in the U.S., and disproving investors such as Jeremy Grantham, who says they will fall 42 percent as interest rates rise in one of the world’s priciest home markets.
“It will take years to turn the shortage around,” said Matthew Bell, an economist at Australian Property Monitors, a researcher cited by the central bank. “When it comes down to it, that’s fundamentally what’s going to drive the market.”
Australia’s median home price was 6.8 times gross yearly income last year, compared with 5.1 times in the U.K. and 2.9 times in the U.S., according to the annual Demographia International Housing Affordability Survey. The nation of 22 million people has six of the 10 most unaffordable cities among the U.S., U.K., Canada, Ireland, New Zealand and Australia, the survey showed.
The median home in Australian cities cost A$468,000 ($395,000) in May, figures from real estate monitoring company RP Data show. The median price of a new home sold in the U.S. in 2009 was $216,700, according to government data.

Thanks for reading this post. If you would like to see more articles like this, please come visit The Real Estate Bloggers. where it was originally published.

Australian Homes Cost Nearly Twice As Much As USA Homes