Freddie and Fannie Inventory of Homes Grows 13% In ONE Quarter

Housing Inventory Held By Fannie and Freddie

The combined REO (Real Estate Owned) inventory for Fannie, Freddie and the FHA increased by 13% in Q2 2010 from Q1 2010.

These are homes that Freddie and Fannie owned the mortgage for and who owners couldn’t make the payments.  They revert back to Freddie and Fannie.

Remember this is just a portion of the total REO inventory. Private label securities and banks and thrifts also hold a substantial number of REOs.

What does this mean?  A lot of homes are owned by Freddie and Fannie.  And the trend is up.  We still have a lot to go to shake out the over supply in housing.

They will have to hold on to the inventory and reduce it slowly.  If they try to move the inventory and the only way they could would be by reducing the sales price, prices all over the country would drop causing more mortgage defaults as homeowners walk away from underwater mortgages.   No way this amount of inventory could be absorbed and maintain prices.