If you saw the Dec 14, 2008, 60 Minutes broadcast featuring a segment titled, “A Second Mortgage Disaster On The Horizon?” you’d probably be scratching your head asking yourself when this meltdown will end.
The segment had Scott Pelley interviewing Whitney Tilson an investment fund manager who is supposedly the new guru on the mortgage bubble explosion.
Tilson is part of Amherst Securities. Amherst is an investment firm specializing in mortgages. Amherst is widely regarded as mortgage and financial detectives. If a guy was going to be funny he could call them the CSI of the mortgage trade. On the other hand, what isn’t funny is the possibility Tilson’s predictions that Alt-A and option ARM loans are about to add to the already huge pool of misery.
He says his data tells him that even though there are the billions of dollars in sub-prime mortgages that reset last year and this year, the full impact of the Alt-A and option ARM resets haven’t hit yet. Tilson says this has the potential to add another $1 trillion in Alt-A mortgages and about $500 to $600 billion in option ARMs to the pool.
I guess if this actually happens we could say we are now talking about real money given all of the bailout dollars being bandied about and given away like they were food samples at the local big warehouse store. The ha ha part to this is that food samples seem to be harder to get than dollars.
Misery On Top Of Misery
To make matters worse, a lady named Sean Egan was also interviewed. Egan runs a credit rating firm that analyzes corporate debt. So do a lot of other people. However, Egan has been cited by Fortune Magazine as being one of six Wall Street pros who predicted the fall of the financial giants. Her expectations for 2009 is that it will be miserable and 2010 not only miserable but probably even worse.
Now this flies in the face of what all the federal government talking heads were, and are, saying. From the Prez on down, the word is recovery begins to happen in mid 2009 and continues through 2010 when the worse should be over. Personally I believe the private sector talking heads but that’s me.
Tilson did do some propagandizing for the stock market but this post isn’t about the stock market, it’s about real estate. It seems to me if these two people are anywhere near the bull’s eye of accurate prognostication, real estate bargains will be available for at least two years. Given that is true, it seems we need not be in a rush to buy a property simply because it is way below market. After all, there will be a new glut of inventory in the very near future that will further depress prices.
I don’t know about you, but I plan on saving all my nickels and dimes for the new year’s real estate fishing trip in my back yard. I should be able to land a few whales. I can only speak for my back yard which is Nevada, the leader in foreclosures, but I would imagine whales are alive and well in every market.
I define whale as that house today going for at most 40% (flexible to 45%) of the 2006 price. 2006 is my arbitrary date. Pick your own.
I won’t go into my data analysis method because you undoubtedly have your own. If it has worked well for you in the past, it will work well for you in the future. Good luck and may the real estate gods smile on your new year of opportunities.
Photo Credit: Tim Morris