Housing Market Still Needs Fannie Mae, Says Their Chief Economist, Duh

By Call it Crazy   Follow   Thu, 7 Feb 2013, 6:08pm   372 views   3 comments
In Menlo Park CA 94025   Watch (0)   Share   Quote   Permalink   Like   Dislike  

Fannie Mae, the government-sponsored enterprise which buys and packages mortgages into securities for investors, says its own survey of consumers shows increasing optimism about the housing market, and the broader economy.

“We ask one question that nobody else asks,” Chief Economist Doug Duncan tells The Daily Ticker. “Is it a good time to sell a house [because] five out of six people who buy a house have to sell one first."

Some analysts like David Stockman worry that the housing is forming another bubble financed once again by extremely low interest rates maintained by the Federal Reserve. Duncan says that could be the case in some selected housing markets where prices are rising at a faster rate than the local economy is improving and building exceeds demand, but it's not broad based. He expects home price appreciation will slow as a result of some overbuilding.

Fannie Mae's chief economist says there are also concerns about low Fed rates—near zero now vs. 1% during the previous housing bubble--contributing to a finance bubble.

“The Fed’s balance sheet is four times the previous high and a big buildup of that has been mortgage-related,” says Duncan. “Their explicit intent is to put a cushion under the decline of house prices...and to see some appreciation so people feel wealthier…. and that will increase consumption.”


Fannie Mae is also helping the housing market recover and Duncan says it will "continue to play an important role in the housing market, providing liquidity” since private capital is not easily available.

Hmmmm, "private capital is not easily available"... Does that mean the "smart money" wants to stay away from a "questionable" market??

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  1. Call it Crazy

    962 threads

    1   6:46pm Thu 7 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    robertoaribas says

    I'll take 3.5% for 30 years, if we ever get any inflation, which half the bears on here predict, how will a million dollars in mortgages feel after several years of higher inflation?

    How will a million dollars in mortgages feel when your empire is worth $500K????

  2. yup1

    11 threads

    2   2:32am Fri 8 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    robertoaribas says

    hmmm, so you are saying prices will drop 75%? Well, then I'll buy another 15!

    You will be wiped out if prices drop 75% period end of story. If you say otherwise than you are doing some fishy shit with your financing. Are you doing fishy shit with your financing?

  3. gbenson

    17 threads

    3   5:19am Fri 8 Feb 2013   Share   Quote   Permalink   Like   Dislike  

    So the 75% drop includes inflation? Which means its more like a 100% drop.. *ya right* Ain't gonna happen. There is a built in floor for housing at around 10% rental ROI.

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