Oberg: Meet the 'KATH' REIT
This post appeared yesterday on RealMoney. Click here for a free trial, and enjoy incisive commentary all day, every day.
The other day, my buddy and I were talking about the housing crisis and "the great unwind." Everyone from Jim Cramer to Bill Gross believes markets cannot turn around until we find the bottom in housing. We are all so nervous about asset deflation that nobody wants to own anything. The housing market, in particular, is in paralysis. Policymakers have the seemingly competing aims of "protecting the homeowner" and "getting the securitization market functioning again."
What he meant was that many of these home purchasers took out an 80% first loan and maybe a 10%, 15% or even a 20% second -- they had very little equity in these homes to begin with given the frothy credit market. (For what it's worth, it would be really interesting to see how much equity has been in/was ever in all these foreclosed homes.) And once the real estate broker commission is figured in, marking on the "bid side," virtually any equity is wiped out. And I am not even talking about the folks who took out "liar loans."
Before I get into the solution, I have to say that everyone seems to be looking for someone to blame in this crisis. But nearly everyone involved in the process has culpability, so let's stop for a minute with the blame assessment and focus on solving this conundrum that we have dragged the entire world into.
OK, so the issue is, how do we stop home prices from going down? How do we stem all of these foreclosures? My friend asked the key question: "What's so big about homeownership, anyway?" He's got a point -- other than those in the industry, who made money on real estate the last five years? And it will be a while before we recoup those lofty levels achieved earlier this decade ... longer if we don't find a bottom soon. Many who bought in recent years would probably like to just walk away. So, why don't they? Simple -- because they have to live somewhere.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV