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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: Mr. Sunshine who wrote (11066)6/5/2003 8:11:14 AM
From: J. P.Read Replies (1) of 306849
 
I don't think inflation or "normal" demand are driving prices higher right now. I think it's the GSE's.

Banks and lenders like Countrywide can ad hoc lend money to anyone with a pulse with little risk. They shovel all the risk to FNM. FNM has privatized the gains, but has the implied backing of the U.S. Government, thus they get the upside, but pawn off the downside.

Since normal risk/reward curves are thrown out the window, you have limitless cash and whole new drivers of demand: 1)Normally non-qualifying buyers (5% down loans, 50% of gross income payments, etc.) 2)Limitless money supply from FNM 3)Huge capital gain base to "roll up"
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