March 25, 2008

Real Estate Market Bottom: Bottom Fishing for Mortgage Deals

No Bottom Until the Mortgage Investors Come Back to Buy

The way lenders replace the cash they have loaned is to resell the mortgage to other investors. They could be Insurance companies, mutual funds, hedge funds or state pension plans. This is how lenders regain the liquidity needed to loan to new customers. The problem we have been facing is that no one is trusting the mortgage and so they are not buying, leaving the lender with no new money.

The real estate markets cannot recover until investors are willing to buy these debts from the lender.

Good News:

Its not nearly a turn around yet, but here are signs that the investors who keep the system flush are starting to look around and the bargain hunting is just beginning. According to a Yahoo news report

Some of the state pension plans are beginning to look at these mortgage obligations.. According to the Yahoo article; "
"This really has no bearing to the fair market value of these assets anymore," agreed Bob Borden, who oversees South Carolina's pension investment decisions. South Carolina has only put $8 million into that fund that includes some subprime mortgages, but Borden expects the rest to go in rapidly as the market swings from extreme fear toward greed."

My feeling is that this will take quite a while and the investment bankers, stock markets and REITS will recover first. I think the buying public is a little shocked and I dont see a buying frenzy just yet. Still, this is how a recovery starts, fragile and tentative...we'll have to wait to see if it sticks.

Thanks for Reading
Howard Bell
A web site of over 450 articles related to real estate focused primarily on property mangement and always free

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