Freddie Mac CEO: Home Price Drops Only 1/3 Done

It's only one man's opinion, but Freddie Mac (FRE) Chief Executive Officer Richard Syron had some rather astounding comments to analysts Wednesday:

- HOME PRICE DROPS "ONLY" ONE THIRD DONE
- WE'RE IN A 100-YEAR STORM IN HOUSING
- US IS IN WORST HOUSING MARKET IN A CENTURY
- APARTMENTS' ROLE IN HOUSING TO BE "MUCH BIGGER"

source: Bloomberg

The most controversial thing Syron was picked up in a Bloomberg report: Federal Rules Let Too Many Poor People Buy Houses, Syron Says.

That is rather inartfully expressed. What I think (or at least hope) he meant was that too many people -- Home owners formerly known as renters -- bought houses they simply could not afford.

Here's the excerpt:

"Freddie Mac Chief Executive Office Richard Syron said he's urging changes in federal rules that enabled too many low- and moderate-income Americans to buy houses they can't afford.

It's "perverse'' that Freddie Mac and Fannie Mae (FNM), the two biggest providers of money for U.S. home loans, have been encouraged "to put people into homes that they end up losing,'' Syron said at a meeting with analysts and investors in New York.

Syron said in an interview that officials at the Department of Housing and Urban Development seem receptive to his suggestions that they change the affordable-housing goals for his McLean, Virginia-based company and Washington-based Fannie Mae.

The goals, which were last updated in 2005, require that a certain amount of the housing units that Fannie Mae and Freddie Mac finance through their overall business and certain sub-segments meet affordable-housing needs."

Hmmm, maybe he and I are referring to different things after all!

Source:
Federal Rules Let Too Many Poor People Buy Houses, Syron Says
Jody Shenn
Bloomberg, March 12 2008

Comments

[TraderMetBfOil:]

In current environment, it is best to short REITs such as Annaly and Chimera.

2008 Mar 13 08:42 AM

[Thomas Smic...:]

I agree that multifamily housing will play a much larger role in future residence arrangements. My quality of renters are way up and the pool is larger due to (finally) realistic stips on loans. Liar loans are, for the most part, history. I have a waiting list of rental clients.

Look for the global warming whackos to jump on the multifamily bandwagon as being in the earth's best interest. Even better for guys like me!

2008 Mar 14 12:34 AM

[Mr Pasadena:]

I will never understand where people think a house needing a $700K mortgage should be a FHA loan. This situation just put people into more debt.

2008 Mar 14 09:58 AM

[Still Renting:]

Yeah, renters moving out of rental and into homes. That is why I went FROM homeowner to renter. I pay $1,600 a month on a $525k home. The amount of money I save (and invest) every month from the house payment on such a home is staggering by most peoples standards.

Plus, as a renter, no worries!

2008 Mar 14 10:02 AM

[CHM97:]

The government has been providing incentives for the over indulgence in real estate investing for years.The tax deductible of mortgage interest, the above required investments in "affordable housing" (see Tony Rezko) and shakedowns on banks by "community housing" groups that held up merge activity until money was invested with these groups.

2008 Mar 15 01:06 PM

[PrincetonAl:]

Just remember this perverse fact - higher home ownership equals higher unemployment rate. That's right - home owners are more locked into and less fluid in the job market. Markets with the highest home ownership have the highest unemployment.

I'm all for making sure those who are disadvantaged have appropriate access to credit and the opportunity to own a home. But maybe we shouldn't automatically assume that touting home ownership as the best goal for those who are most likely to face unemployment.

But I'm not letting Syron off the hook for his comments ... just stirring the pot further.

2008 Mar 15 10:58 PM

[DGW08:]

Greed by all those that made unsupported loans for personal residence ( homes ) brought on the current mess - many of us saw that coming , Except the lenders and banks . So be very cautious about any advise that comes from a banker - that is tainted advise.
Any lender that booked a homes value at 75% of the selling price was just unrealistic . First subtract the selling commission from the selling price , then book one-half of the remainder as an asset . Any amount loaned above this now realistic value is really an unsecured loan . The lender then has to determine if the applicant(s) can carry this unsecured portion of the mortgage . If not , then other assets need to be found to support this over book value amount of the loan / mortgage. If this had been done as a regular matter of daily business , there wouldn't be a meltdown today .
But , the unrealistic business practices of greedy people make an opportunity for those of us that aren't wiped out . Buy a good house cheap in a good location , sit on it for 10 years , and sell to reap the profit . Live in it or rent it to good tenants , perhaps even rent it to the people that are being evicted . They have to live somewhere.

2008 Mar 16 03:23 PM

[Terence:]

It is beyond belief that Bear is being dumped for 2 dents on the dollar what it was selling for just 4 months ago. Of course, the execs have all squirreled away the millions they stole from investors while running the business into the ground. The board and executive staff at Bear should be stripped of their money, and dumped naked in the middle of Wall Street to run home in shame.

2008 Mar 17 05:48 AM

[Uncle B:]

The U.S. financial and Government systems are so corrupt that the only real effect of corporate bail-outs and government hand-outs is the devaluation of the U.S. dollar against the only real standard in the world - the price of a barrel of oil- set by very smart men, that will no longer tolerate the U.S. Crooked 'fiat' monetary system and have devised a way to set the price of oil in ANY currency, ANY time, based on products bartered for a bbl of oil. American politicians can do anything they want to fool the American people, but they cannot screw the oil producing nations now that China and India ar bidding for their share! The price for real estate market manipulation will be paid, at the gas pump, by the American people.

2008 Jul 28 11:41 AM

[mister d:]

the facts are that the real loans made in distressed neighborhoods had nothing to do with this failing. bad loans to illegal property flippers in these neighborhoods represent a large portion of these loans making it appear that these neighborhoods are to blame. The disgusting fact is that these flippers knew of these programs, actually designed to improve distressed neighborhoods, would be beneficial to them if they utilized mainly minority straw buyers for their illegal transfers on the back end of their flips. The fact that fannie, freddie and all of the major lenders are not currently unloading their bad loans via foreclosure is more frightening. At first i believe these loans were not unloaded to make the companies balance sheet look better to the public and the compensation commitees of their organizations. It is obvious to me know that the reason for not unloading these assets may be something more sinister. I sincerely hope i am wrong but my theory is that these geniuses mat have assigned these mortgages to more than one person creating title problems. Numerous courts have dismissed foreclosure preceeding because the institution filing the compliant to foreclose cannot come up with the actual mortgage. This is only a theory but it is somewhat supprted by the fact that none of the recovery plans proposed ever mentioned the posibility of unwinding these intruments. Why is it so important that these intruments be saved as a whole? I beleive to cover up the fact that they were inproperly placed, rated etc. as a whole and the bailout that is currently in the works only serevs to protect the guilt and hide their illegal activities.

2008 Oct 11 12:53 PM