Why Would Fannie Mae Pay $512/sq ft For A Foreclosed 66 Year Old 800 sq ft House?
California real estate turns out to be a veritable gold mine for rip off artists, local and federal. One week past, a single family dwelling in La Crescenta sold at foreclosure auction for $405,699.00 to our friends at FNMA, aka Fannie Mae.
One might call this a very smart deal, a loss of less than .7% to WFB. But when the house is only 791 square feet, lot size of about 5000 sq. ft., the property comes nowhere close to what can be very well-built for the money in the present market. Granted, it is located under the domain of Glendale Building and Safety (California, of course), one of the most stringently controlling anywhere, but over $510.00 per sq. ft.?
No one from FNMA visited the property before or after the auction, neither did any appraising entity. An estimation of the termite riddled, sub-standard plumbing, un-air conditioned, wall furnaced parcel would have driven the price below $300,000.00.
Questions put to local realtors received few answers. They’re not talking really.
Rumors were rampant. One was that FNMA was buying up inventory, holding it, hoping prices will go up. But nobody is his right mind would invest that amount of money for a flip, remodel, refurb, or even to live in it. The numbers don’t pencil, they don’t even Sharpie.
A second rumor was that there is so much underwater housing that a second huge wave of foreclosures would depress real estate prices so badly, that the country would go back into an even steeper recession based on property values. It would be called a dip, but in reality, it would be a depression. It’s happened before. Hints are that FNMA is being used as a stopgap to keep the bubble inflated.
What is not being discussed, as well, is the looming crisis when re-fis, loan mods, and transfers expire in January 2014. Those who struggled to hang onto their homes in the last few years are first in line for loss.
A lot has been said about how profitable Fannie Mae/Freddie Mac are, but the real query is whether the institutions are really profitable, or are their holdings hard assets, like property, not easily disposed? The follow-on question is: who’s calling the shots here? Is this yet another inflationary policy doomed to the same failure as sub prime loans?
Realtors naturally put on a very brave face as to the state of the market, but there’s a gloomy undertone to their advertising and press releases. There will probably be a decent market in California in the half a mill range…for a time, but these things come due one day.
If employment goes south under the strictures of Obamacare, as most expect, FNMA’s held back inventory could easily crash the institution in a very short amount of time. Unless it is bailed out as a “troubled asset” holder, more than expected.
Banks, lenders forewent swallowing the bitter pill of comeuppance once much to the consternation of good businesspeople. But the pill is still on the tray, more a bullet than a pill.
The regular people who work at Fannie Mae are a very nice group, doing a job as best they can. But it is a total unknown as to who’s running the place with policies that toss money everywhere.
Probably okay if one owns a printing press that can turn 4000 Franklins in a few minutes, huh?