Real Estate

Investing in US mortgage giants is a lottery

7 Jul 2008

Fannie Mae and Freddie Mac shares fell sharply on Monday. The future for the US mortgage groups is clear as mud. Even ignoring loan losses, the impact of their use as government policy tools and their supposed taxpayer backing is murky. Shareholders are right to be wary.

JPMorgan defection a coup for Canary Wharf

1 Jul 2008

When the US investment bank decided last year to locate its European HQ in the City it was considered a shot in the arm for London s historic Square Mile. Now it is defecting to Canary Wharf. With office rents now falling, it s a setback the City didn t need.

Taylor Wimpey kicks off UK housebuilder capital-raising spree

30 Jun 2008

The UK company is unlikely to be the last in the sector to pass the cap if house prices keep falling, most will have to write down asset values. But the deal's likely structure suggests the builders may have learned from UK banks chequered attempts to raise capital.

UK housebuilders face bank straitjacket

18 Jun 2008

Shares in Taylor Wimpey, Barratt and their peers have dived again. If UK house prices fall 20%, some big names could break their covenants. Banks would then have to nurse them back to health. But the medicine tight controls on their spending and higher rates could be painful.

UK bank exposure to mortgages: not all bad

13 Jun 2008

Taken as a whole, the UK banking sector s mortgage exposure is well collateralised, less exposed to first time buyers than the last crash, and with better legal protection than US lenders. That does not mean the banks are immune from a recession but it helps.

Bradford & Bingley’s buy-to-let bombshell spooks UK banks

2 Jun 2008

B&B s profits warning makes the UK buytolet market look precarious. Highly leveraged borrowers already in negative equity are now heading into arrears. A wave of forced selling would hit house prices and spell more pain for all UK mortgage lenders.

Spanish house sales tumble, prices to follow

29 May 2008

Spanish mortgage borrowers are much less stretched than their UK counterparts. And house prices are still going up. But transactions are down by 38%. Buyers suspect that the huge overhang of unsold houses will eventually bring prices down to even more affordable levels.

Even the faithful should now sell Fannie and Freddie

21 May 2008

The mortgage giants spun profits before the crunch. Now US lawmakers want their shareholders to bear a lot of the burden of cleaning up the mortgage mess. If GSEs are predominantly tools of public policy, shareholders should sell maybe to the government itself.

US housing bailout risks making matters worse

20 May 2008

The Senate s $300bn political figleaf courts disaster. Slashing principal on underwater mortgages and refinancing homeowners into cheaper loans may sound good. But it could push house prices down rather than supporting them. And it provides perverse incentives.

Shareholders shouldn’t trust Freddie Mac

14 May 2008

The mortgage giant says its accounting snafus are behind it. But its credibility is shot. Freddie is raising $5.5bn after saying in March that it didn t need more capital. And its watchdogs are loosening its leash just as the mortgage mess deepens. Investors should worry.

Should Goldman dabble in some DIY?

13 May 2008

The prospect of paying the Wall Street firm $320m in penalties might not be enough to encourage New York s politicians to speed up construction and security work around its shiny new HQ. Goldman could offer to oversee the project and even get some of its bankers to chip in.

UK house prices likely to fall at least another 20%

7 May 2008

After six months of decline, most forecasters don t expect sharp further falls. But it will take a big drop in the typical mortgage payment to bring its share of income down to the longterm average. With mortgage volumes cut almost in half from last year, that s quite possible.

Fannie’s $6bn capital-raising is a fig leaf

6 May 2008

After all, the mortgage giant s regulator is reducing its capital standards, despite its $2.2bn loss. Allowing Fannie to leverage itself up makes the most of the government s tacit guarantee. But Fannie's shareholders should beware it could burn through the new capital fast.

UK commercial property slump isn’t over yet

1 May 2008

The 17% fall in values since last summer seems to be easing off April s decline was the mildest this year. But while yields on commercial property have risen close to their longterm average, rents could tumble if the economy slows. That s beginning to look more likely.

Colonial lenders face uphill struggle to recoup losses

28 Apr 2008

Spanish banks are counting the cost of financing leveraged stakebuilding in the stricken property firm. After a debtfor equity swap, they need to almost double Colonial's share price to break even. That's not impossible, but the property market outlook isn't that rosy.

Flowers’s E1.1bn Hypo bid hardly the dream deal

17 Apr 2008

The German bank looks a better bet for the private equity firm than Friends Provident. Hypo is cheap and has a promising loan flow. But it s not ideal. Flowers is getting only 25%, and Hypo s discredited bosses will stay. Flowers may be feeling the pressure to do a deal.

UK voters right not to trust PM Brown

14 Apr 2008

Faced with a slight dip in house prices and the scrapping of irresponsible loan offers, the UK is in the grip of panic and polls show the government on the ropes. But the real risk is not that a dithering prime minister does too little, but a desperate Brown does too much.

UK house price slump will get worse

8 Apr 2008

UK house prices fell 2.5% in March, the biggest drop since 1992. Lenders have withdrawn all nodeposit home loans, mortgages are being rationed, and a glut of buytolet property is waiting to hit the market. Forecasts of 5% price falls this year look increasingly complacent.

Greenspan should bear blame for bubble and crash

7 Apr 2008

The former Fed chairman grew US M3 money supply 3% faster than GDP for 11 years, flooding the world with cash. He also allowed US banks to build huge webs of obligations on inadequate capital. That makes him a prime suspect as an architect of the current mess.

Expedience jeopardises a simple housing fix

3 Apr 2008

Letting US bankruptcy courts adjust mortgages just like other loans would help hardesthit borrowers those braving personal bankruptcy. It would cost the government nothing, and could help lenders. But with Congress compromising in pursuit of speed, the idea has been shelved.