WatchFannie 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.
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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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Call it Crazy says
Hardly. Once again, another article, another attempt to twist it into a negative prediction about housing.
What it means, is private money doesn't want to get tied up at 3.5% for the next 30 years. There is a saying in the banking business about borrowing short to lend long...
Well, in my opinion, the smart thing to do is borrow long. 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?
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robertoaribas says
How will a million dollars in mortgages feel when your empire is worth $500K????
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Call it Crazy says
hmmm, so you are saying prices will drop 75%? Well, then I'll buy another 15! you forget, my mortgage = less than half of rent on those I bought with mortgages, the rest I own outright...
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robertoaribas says
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?
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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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yup1 says
I bought one of my places for $26K... today, those type of units are selling for $70K...
EVEN IF it dropped 75%, which is of course ridiculous nonsens for dreamers and losers to hope for, that would put it at $17.5K... Given the by then 3 years of rental income I've had, I would still break even, assuming that for some crazy reason, I sold then, instead of buying another one!
Dream on!