Tuesday, January 26, 2010

Coming Real Estate Buying Opportunities

The Financial Times reported yesterday that the FDIC is working on plans to sell off some of the toxic real estate that they have acquired over the past two years.

The FDIC is the government institution put in place to take over a failed bank.  They also guarantee the deposits up to $250,000.

They plan to package the assets and sell them into the market.  This was the same tactic used by the government during the savings and loan crisis back in the early 1990's.  During that period it was called the Resolution Trust Corporation.

I applaud the move as it is a real step needed to cleanse the market.  During the S & L crisis real estate was sold by the government at pennies on the dollar and it was the time real investors entered the market to purchase the real estate.

The government is now able to pursue this strategy again because all of the big banks have been nationalized.  They also have changed their accounting rules so they do not have to report actual losses.

The losses moving forward will be faced exclusively by the taxpayers.  However, this means we are getting closer to the point where it will be time to purchase real estate.

If the strategy is put into place anyone still holding real estate will be decimated as the FDIC sales will become the new prices for property.  They will create a true market.

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