Federal Housing Support Ends Soon. Then What?

I’ve been pondering how the housing market will fare as federal support programs wind down.

First, the Federal Reserve will discontinue its purchase of mortgage-backed securities, which has artificially kept mortgage rates down. Then, the homebuyer tax credits will expire at mid-year, leaving the housing market to fend for itself.

How will it do?

The New York Times hit that subject today, and while Portland is no Elkhart, Indiana, I do worry about the second half of the year here.

…it is uncertain whether the government can really pull back without sending housing markets into another tailspin. “A rise in rates would kill us all by itself,” Ms. Swartley (Elkhart Realtor) said.

The Obama administration has offered few ideas about reforming the housing market. Proposals for the future of Fannie Mae and Freddie Mac, the mortgage holding companies taken over by the government at the height of the crisis, were supposed to be introduced with the president’s budget this month. They were not.

The government programs, however crucial, are distorting the market. The tax credit produced sales last fall, but some lenders here say it has troubling implications.

Troubling, indeed. Read the full NYT article here.

Photo by pfala, used under Creative Commons license.

February 15, 2010 · Filed Under Forecasts, Mortgages, National News

Comments

3 Responses to “Federal Housing Support Ends Soon. Then What?”

  1. Ginny Cerrella Santa Fe Real Estate » Blog Archive » Reverse … | Mortgage Finance Wisdom on February 15th, 2010 11:48 am

    [...] Federal Housing Support Ends Soon. Then What? | Portland Oregon … [...]

  2. James Adair on February 15th, 2010 8:04 pm

    I have a pet conspiracy theory that there has long been no intention of actually discontinuing the federal MBS purchase plan. Bernanke needed to keep saying that this would end as scheduled in order to be re-elected to his post (mission accomplished). So I predict that this will be extended for perhaps the remainder of 2010. Even if I’m wrong about this, I am on record predicting that rates will max out this year at 5.5% . if they exceed this, it will only be for very short periods before returning to 5.5%. BOOK IT!

  3. Ron Ares on February 15th, 2010 8:16 pm

    I think rates have the biggest impact, so if they stay low, great.

    The tax credit is really only benefiting the under-$300K price point–the move-up credit is nominal at best.

    I’m mostly concerned about employment figures, global economic conditions and how they affect local consumer confidence.

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