Housing in the tank

The housing market is bad.  And it’s getting worse.  A report on CNN today says:

Hammered by the ailing housing market, mortgage finance giant Fannie Mae said Thursday it would tap its lifeline from the Treasury Department after reporting $58.7 billion in losses for 2008.

The company, a crucial source of funding for mortgage lenders, said it would draw down $15.2 billion of its $200 billion federal line of credit. In return, the government will receive preferred shares.

And it gave a dour view of the housing market — saying it expects peak-to-trough price declines to be in the 33% to 46% range, up from the 27% to 32% range it gave in the previous quarter. For 2009, it predicts home values will drop 12 to 18%.

For the fourth quarter, Fannie Mae reported $25.2 billion in losses, or $4.47 per share. The results mark the sixth straight quarter of losses, though slightly narrower than it reported in the third quarter. A year ago, Fannie Mae reported $3.6 billion in losses.

The company, which was taken over by the government in September along with Freddie Mac, attributed the losses to soaring defaults. Its provision for credit losses plus foreclosed property expense came to $12 billion for the quarter, up 30% from the previous quarter. Its charge-offs, or loans written off as uncollectable, rose 219% to $7 billion in 2008.

So as bad as the housing market has been, Fannie Mae expects it to get worse.  Prices are expected to drop another 12% to 18% this year.  And we (the US taxpayers) are on the hook for another $15 billion in bailout money.

Why not let Fannie go broke?  Investors in Fannie Mae would be screwed, but it’s better than soaking all of us who didn’t give them money willingly.  Instead. we’re now all investors in Fannie – whether we think it’s a good investment or not.

Socialism sucks.

gk

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