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COVER STORY
A
s private capital creeps back into the secondary mortgage
market, emboldened by housing's precipitous comeback from a
near catastrophic slide, not surprisingly, some experts caution
that the worst isn't over—and probably won't be for some time.
Jeff Freud, CEO of LoanMarket.net, labels
the latest strides in housing as a mirage of sorts.
"I think we're bouncing on another false bottom,"
he explained. "We see this seasonal uptick every
year this time of year in every market, no matter
how depressed it is. You're buying these nonperforming loans at such a discount; everyone
comes in with greedy expectations."
Mirage or not, expectations among private
investors appear to be relatively high as they ride the
wave of the current market momentum, Freud says.
"Investors are definitely more interested in
putting capital into the housing market. We've
seen a drastic uptick," he commented. "We're
waiting for June results, but in terms of pricing
and units sold, I think it will be one [of] our top
three months on the non-performing side since
… 2008." The activity reflects the fact that buyers
believe real estate prices are on the rise or, at
least, have stabilized, Freud says.
He attributes private investor activity in the
secondary market to his belief that "many of
these guys are mortgaged with no skin in the
game and have raised money with no skin in the
game. You have to keep the engines going, [and
to do that], you have to keep buying." Despite
his skepticism, Freud concedes that successful
investors have, with at least some success,
maintained the pace through the sways in the
market over approximately the last five years.
"Their returns aren't 30 percent or 40 percent,
but they're still high teens, and the investment
capital's there for them," Freud said.
Investors are beginning to see improvements in
market conditions. Investment U Research, which
provides strategic financial recommendations for
all levels of investors, notes that housing starts
have posted consecutive monthly gains, with the
number of units now exceeding an annual rate
of 715,000. While that gets the market nowhere
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