Are We Repeating Housing Market Mistakes?

Online, October 13, 2010 (Newswire.com) - In 2004 and 2005, at the height of the real estate bubble, most of us probably saw lenders offer the following deal to a home buyer: 3% down, we pay closing costs, we pay for all home repairs for the first 5 years. While it is widely accepted that 'free and easy' credit was one of the major factors behind the credit market meltdown, noted financial advisor Dennis Tubbergen, along with many of the rest of us, thought we would be smart enough not to repeat those mistakes again. But are we?

Tubbergen, who is CEO of USA Wealth Management LLC, a federally registered investment advisory company, doesn't think private lenders are making the same mistakes, but believes government-controlled Fannie Mae and Freddie Mac are going back down the 'easy credit' roads.

Referring to a SmartMoney.com article from September 29, 2010, Tubbergen states that Fannie Mae and Freddie Mac are trying to quickly unload 150,000 foreclosed homes - many with the same deal noted above: 3% down, offering to pay a portion of the closing costs, and special financing and warranties for repairs and renovations.

According to Tubbergen, one of the problems associated with such a sale is that it is driving buyers away from fair-market properties in the same area, many of which are selling for thousands of dollars more. The SmartMoney.com article states the end result is angry, frustrated neighbors whose nearby properties are being devalued along with the foreclosed homes.

"I once heard the definition of insanity was doing the same thing over and over again while somehow expecting to get a different result," explains Tubbergen. "This action by Fannie and Freddie, in my mind, is insanity."

Tubbergen, who frequently gives his opinion on the economy in his financial blog and his monthly newsletter Moving Markets, has recently been forecasting a possible bottom to the housing market in 2012.

"This kind of ridiculous action could drag that date out," concludes Tubbergen.

For more information on Dennis Tubbergen's views, visit www.dennistubbergen.com.

The opinions expressed herein are those of the writer and not necessarily those of USA Wealth Management, LLC. This update may contain forward-looking statements, including, but not limited to, statements as to future events that involve various risks and uncertainties. Forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual events or results to differ materially from those that were forecasted. Therefore, no forecast should be construed as a guarantee. Prior to making any investment decision, individuals should consult a professional to determine the risks, costs, benefits and fees associated with a particular investment. Information obtained from third party resources is believed to be reliable but the accuracy cannot be guaranteed.