There are a significant coming down the pike in short order that will surely affect the housing market & the ability of some buyers to purchase a home. The one-two-three punch includes the expiration of the Home Buyer Tax Credit on April 30th & the scheduled termination on March 15th of the Federal Reserve’s program of purchasing of Mortgage Backed Securities. This is a program was begun in 2009 to help keep a lid on rising mortgage rates and make more money available for loans.
These upcoming game changers, along with stricter guidelines for FHA Mortages taking effect on April 15th, are expected to raise interest rates & de-incentivize and/or eliminate some of the home buyer pool.
These three strikes looming against the housing market may mean a volatile spring ahead. The spring bounce we look forward to just might become instead a 9th inning cliffhanger. As the Washington Post reported on Friday there has been some buzz re: A Possible Extension of The Feds Mortage Backed Securities Buying Program.
I think the Feds would be wise, at least for the short term to maintain the status-quo. The termination of this program is expected to have a major impact on mortgage rates/interest rates to the upside, and since whatever housing recovery we see is currently being sustained by low price tags, mega inventory, tax credit incentives & historically low rates, the impact of losing two of these market “prop ups” & safety nets (the Buyer Tax credit & Feds Mortgage buying) IMHO will lead to a dramatic downside for Housing Market & the economy overall.
Let’s hope, as reported in the Washington Post, the FED will not only seriously consider, but implement a last minute pinch-hit to save the game! Of course the Feds weighty decision hinges on a lot of economic variables, ( & surely some political consideration and/or pressure), so toss a coin & take a guess at what their decision will be. You’ll have 50% chance of getting it right!
“So far, the Fed’s net buying of mortgage-backed securities totals nearly $850 billion, or about 80% of securities issued this year by entities like Fannie Mae and Freddie Mac.
Since these agencies bought nearly all new mortgages made this year, the central bank has effectively acquired most of the home loans made in the U.S. That has helped soften the decline in house prices and sparked a refinancing boom that has boosted spending power for many households.” Read Full Article
- Mortgage Guru Dan Green has some insightful views on the future of the mortgage/housing market.
Check out his 5 minute video! The Crystal Ball : Housing Market, Mortgage Rates, FHA Guidelines, And Investor Overlays
NOTE: There is still time to find your Wilmington NC area home & take advantage of the Home Buyer tax credit. As long as the Contract is signed before April 30th, we’re good to go!