Housing News

Date: Feb. 2nd, 2009
Contact: Kelli Brown CCMC Lending
Finally, some unexpected & not entirely bad news... The combination of lower housing prices and record low interest rates lead to a 7% increase in single family home sales in December. According to NAR's monthly affordability index, housing affordability has reached its highest level since 1973. The NAR continues to put pressure on the Obama administrator to include a non-repayable home buyer tax credit in the stimulus package currently being debated. The hope is to stablize home prices and stimulate an upturn in the fast approaching Spring season.

According to the NAR, they will "continue to emphasize the need for a mortgage interest-rate buydown and improved foreclosure mitigation programs as key components to improved stability in the housing market. NAR is also asking Congress to concentrate efforts on strengthening the commercial real estate market to protect the nation’s economy."

Weekly Market Review
The Fed met last week, leaving the Federal Funds Rate untouched, hanging around 0% for the forseeable future. Since their last meeting in December, reports indicate the economy has weakened further, stating "Industrial production, housing starts, and employment have continued to decline steeply, as consumers and businesses have cut back spending. Furthermore, global demand appears to be slowing significantly." Keeping the rate low continues to allow banks to lend money overnight at very low rates. This low rate gives banks incentives to lend more money, which in turn influences short-term interest rates like, deposits, bank loans, credit card interest rates and adjustable rate mortgages.

Last week brought the Federal Deposit Insurance Corp (FDIC) into the mix as it is aiming to take control of the "bad bank" concept that is being discussed. In this scenario, a "bad bank" would be setup by the US government and run by the FDIC with a goal to buy up the toxic assets held by banks (including many troubled mortgages). These troubled assets have very few buyers on the open market and this would put the government in the position of purchasing these assets at a higher-than-market value. The risk with this strategy is that if the housing market does not rebound in a timely manner, these "bad" assets will become worse and the tax payers are stuck holding the bag.

Seven Day Forecast
The Personal Income report comes out today, which gives a broad gauge of employee earnings in the US. It gives an indication of the purchasing ability of consumers, based on their income. At the end of the week January's unemployment report will be released. The numbers are not expected to be good this month with many industry big hitters having announced cutbacks recently.