Improved Conditions to Begin 2009
Conforming mortgage rates ended 2008 at the lowest levels in decades. One reason is that inflation is not a concern right now due to the current economic weakness and the decline in energy prices. In addition, the Fed has begun to purchase mortgage-backed securities (MBS), increasing the demand. Mortgage rates are generally determined by the price of MBS. On November 25, the Fed announced a plan to purchase as much as $500 billion in MBS, and mortgage rates have dropped significantly since the announcement. Low inflation and Fed purchases of MBS are expected to continue in coming months.
Along with low mortgage rates, homes have reached their best level of affordability in many years, according to the National Association of Home Builders (NAHB). The NAHB index compares the cost of paying for a home, based on average home prices and mortgage rates, to the median household income. Increased affordability allows more people to participate in the housing market, which should boost demand for new and existing homes.
The consensus outlook is that the economy will begin to improve during 2009. In addition, both the Mortgage Bankers Association (MBA) and the National Association of Realtors (NAR) expect the housing market to improve next year. The NAR predicts that both the number of existing home sales and home prices will increase in 2009. The combination of a rebounding economy, low mortgage rates, and affordable home prices provides good reason to expect an improved housing market in 2009.
Joe Finucan, First Place Bank
Tuesday, December 30, 2008
Wednesday, September 10, 2008
A Lender message - RE: Fannie Mae & Freddie Mac
Over the weekend, the government announced that Fannie Mae and Freddie Mac were placed in conservatorship. This means that the two companies will temporarily be run by their regulator, the Federal Housing Finance Agency. The Fannie and Freddie Boards and Executive Officers were replaced, but employees were encouraged to stay. The stated objectives of this action were to stabilize the mortgage market, insure the availability of funding for new mortgage loans, and insure that new mortgages are affordable.
While a conservator will have control over Fannie Mae and Freddie Mac, product availability and day to day operations for the origination of mortgages are expected to continue uninterrupted and essentially unchanged. Fannie and Freddie are expected to increase the number of mortgages they own this year and next year, before reducing their portfolios beginning in 2010. Fannie and Freddie together own or guarantee roughly half of the $12 trillion in outstanding mortgage debt, and they are currently responsible for about 75% of all new mortgage originations, so the viability of the two companies is essential for an efficient mortgage market. As a result of the takeover, the government now explicitly guarantees the obligations of Fannie and Freddie securities. This has removed uncertainty and increased the demand for mortgage securites. Both domestic and foreign investors had recently reduced their purchases of mortgage securities, and they are now expected to be comfortable stepping up their purchases again. Mortgage rates reacted favorably to the news on Monday. First Place Bank - Joe Finucan
While a conservator will have control over Fannie Mae and Freddie Mac, product availability and day to day operations for the origination of mortgages are expected to continue uninterrupted and essentially unchanged. Fannie and Freddie are expected to increase the number of mortgages they own this year and next year, before reducing their portfolios beginning in 2010. Fannie and Freddie together own or guarantee roughly half of the $12 trillion in outstanding mortgage debt, and they are currently responsible for about 75% of all new mortgage originations, so the viability of the two companies is essential for an efficient mortgage market. As a result of the takeover, the government now explicitly guarantees the obligations of Fannie and Freddie securities. This has removed uncertainty and increased the demand for mortgage securites. Both domestic and foreign investors had recently reduced their purchases of mortgage securities, and they are now expected to be comfortable stepping up their purchases again. Mortgage rates reacted favorably to the news on Monday. First Place Bank - Joe Finucan
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