(This is an excerpt from an article I originally published on Seeking Alpha on December 14, 2012. Click here to read the entire piece.)
Nine months ago, I wrote about Vertical Capital Income Fund as a way to participate in the bottoming of housing through an investment in mortgages. On November 28th, I checked in with management to get their take from the frontlines regarding the on-going recovering in housing. Once again, Vertical’s Chairman, Gus Altuzarra, a 30-year veteran of the mortgage industry, was kind enough to take my call and speak to me for about an hour.
I asked a series of questions regarding the condition of the market, including pricing, demand-side economics, and credit conditions. I categorized Mr. Altuzarra’s responses using themes. Overall, the near-term outlook is for more of the same: a housing market in recovery but far from booming. Credit conditions remain tight and investors remain the dominant players in the market. From what I understand, once real credit conditions ease, the market could experience a swell of pent-up demand from people whose buying power will be unleashed through access to loans.
{snip}
Who are the homebuyers?
Investors who pay cash dominate the housing market. {snip}
Credit markets
Credit conditions are tight and credit markets remain plugged up.
{snip}
Housing Prices
Investors paying cash are not the same kind of buyers as owner-occupants who want to move in. Owner-occupants can afford to pay more than these investors since they can get loans. So, the buying demand from investors happens at an otherwise lower price point. If loan conditions were more reasonable, homes would appreciate much more. {snip}
Attitudes Toward Home Ownership
In excess of 87% of borrowers pay on time whether upside down or not… {snip}
Be careful out there!
(This is an excerpt from an article I originally published on Seeking Alpha on December 14, 2012. Click here to read the entire piece.)
Full disclosure: no related positions although I will likely soon become an investor in the Vertical Capital Income Fund