Thursday, November 12, 2009

All The Action Just Went To The FHA

That's what a mortgage broker told me in early '08...

The Federal Housing Administration said Thursday morning that its cash reserves had dwindled significantly in the last year after a record drop in home prices.


Still, agency executives stopped short of saying that a direct bailout would be needed. The F.H.A., which insures loans made by private lenders, guaranteed more than $360 billion in mortgages in the last year, four times the amount in 2007.


“They’re running on empty,” a consultant Ann Schnare said. “It all depends how long it takes housing to recover.”

Housing isn't going to recover. Sure there are some submarkets where extreme overbuilding happened and things really are at fire sale prices, but overall...housing isn't going to recover because home prices are still high relative to historical trends. They're only remaining that way because of all of the efforts to prop up home prices.