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

By Ironman   follow   Thu, 7 Feb 2013, 10:08am PST   ↑ Like   ↓ Dislike   577 views   3 comments   Watch (0)   Share   Quote  

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??


Comments 1-3 of 3     Last »

Ironman   befriend (0)   ignore (14)   Thu, 7 Feb 2013, 10:46am PST   Like   Dislike (1)     Share   Quote   Comment 1

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????

yup1   befriend (0)   ignore (2)   Thu, 7 Feb 2013, 6:32pm PST   Like   Dislike     Share   Quote   Comment 2

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?

gbenson   befriend (0)   ignore (0)   Thu, 7 Feb 2013, 9:19pm PST   Like   Dislike     Share   Quote   Comment 3

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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