Fannie and Freddie's Big Foreclosure Backlog is Looming.
I recently went on vacation and got caught up on my financial magazine subscriptions. I ran across an interesting article that discussed in depth the Fannie Mae and Freddie Mac backlog of foreclosure homes.
Here are the highlights that every Investor should be aware of:
- Inventory is at an all time high on the books. Foreclosed residential property has “quadrupled” the past three years.
- They represent around $24 billion in assets approximately and close to 250,000 homes.
- The policy of supporting neighborhood values is not working. A policy shift is imminent.
- The 2011 forecast of $3.5 million homes will be reached and can even go higher
- Banks own about 70% of America's foreclosed homes
- Fannie & Freddie Mac (government backed) control close to 30% of all foreclosed homes.
Frannie and Freddie don't want to have a fire sale but may have to drastically cut prices to move inventory off their books. they are taking possession of homes much faster then they are selling them. For the first three quarters of 2010 they have being only to move 2/3 of all properties repossessed at a lagging rate.
As an investor, I often see foreclosures that just sit there because the price is “too high” or does not correctly match the current condition of the property and similar comps in the neighborhood. Even from the perspective of a homeowner, foreclosure homes are not priced attractively.
So what does that mean?
You can expect Fannie & Freddic Mac foreclosed homes on the market after the first 45 – 90 days to start declining in prices. That would be a HUGE win for investors to take advantage of. Buying properties at a 30% – 40% opens up a whole host of options to making money as a real estate investor.
Caution – If you are a flipper or rehabber, there may be seasoning or minimum hold time to be concerned about. However, if you are a buy & hold, lease option, wholesaler or value investor this if prime time for acquisition.