Mortgage Rate News

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After holding relatively steady for months, housing starts fell in October. One of the main reasons for the drop, say many analysts, is the fact that the fate of the first time home buyer tax credit was in doubt. As a result, builders slowed their projects. However, with the extension and expansion of the home buyer tax credit, there is a good chance that things will pick up again — at least until the end of April 2010, which marks the new deadline. MarketWatch reports on the expectations going forward:

“We believe housing starts’ strong decline to be only temporary, and should resume modest growth and stabilization over the next several months, as the tax credit extension should support market demand and perhaps offset some of the seasonal slowness in the winter months,” said Michael Rehaut, economist at JP Morgan Chase in a note to clients.

The tax credit, though, can’t protect the housing market from the economic realities of a weak labor market and slow economic recovery. Indeed, this morning President Barack Obama warned that conditions may be setting up for a double-dip recession. He did say that his administration was working on programs and ideas to prevent such a thing from happening, but he has put everyone on the alert.

Economic recovery has been slowed due to problems with joblessness. Companies are reluctant to hire, and that is causing some concern. Without jobs, people can’t buy new homes and help the housing market.  Additionally, lack of employment makes consumer spending – which accounts for approximately 2/3 of the U.S. economy — difficult to boost.

It will be interesting to see how things play out going forward. Will Obama’s honesty about the possibility of a double-dip recession help people prepare for an eventuality? Or will his early warnings be heeded and a back slide completely averted? Only time will tell.

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For the third month in a row, foreclosures have declined. October saw a decline in home owners ready to lose their homes. Thanks to programs aimed at helping home owners refinance or modify their loans, foreclosures have been slowing. However, as BloggingStocks reports, there are still concerns for the future:

The number of homeowners on the brink of losing their homes continued to decline in October for the third straight month, as foreclosure prevention programs helped more borrowers. But foreclosure filings are still up 19% from a year ago, reaching more than 332,000 households, or one in every 385 homes. Rising unemployment could threaten the stabilizing trend.

Programs to help at-risk home owners aren’t much good if these home owners do not have jobs that can provide income. Therefore the continued weakness in the labor market is providing some concern. Advance unemployment data for last week is offering some hope, though. Jobless claims appear to have dropped by quite a bit, bringing the number down to around 502,000. This is the lowest it’s been for months.

However, the fact remains that jobs are still being lost.  They are being lost at a slower rate, but they are still being lost nonetheless. A dramatic reduction in the pace of job losses will be needed in order to provide a solid basis for economic recovery and quiet fears of continued destabilization in other parts of the economy.

At any rate, there is optimism that slowing unemployment will help matters in the housing market, also leading to slowing foreclosures. And, as more people take advantage of government programs meant to help them afford their homes, there is a strong likelihood that they will not have to be subject to foreclosure. And that in turn may help keep the housing market from sliding back into another dip next year.

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Freddie Mac saw a 3rd quarter loss of $5 billion as foreclosures continue to cause problems and the economic climate makes things difficult for individuals. Freddie Mac also expects, at some point, to request more funds from the U.S. Treasury. HousingWire reports on the state of the housing market and the mortgage market:

“We continued to see some positive housing market developments, including higher volumes of home sales and modest increases in house prices in certain areas of the country,” said CEO Charles Haldeman. “However, we believe that factors like high unemployment, excess inventory and rising foreclosures will continue to impede a full recovery for some time and put further downward pressure on house prices. We expect to request additional funds from Treasury as this prolonged deterioration of market conditions continues to negatively impact our financial results.”

Guaranty programs continue to see government support as the Obama Administration moves to help guaranty loans and provide insurance so that people can refinance their homes or get loan modification. However, it may not be enough. Foreclosure continue to mount, and these programs are still largely voluntary on the part of mortgage lenders. Additionally, loans need to be serviced by Fannie or Freddie in order for borrowers  to take advantage of many of the programs.

In the end, there is still a long way to go. Freddie Mac is likely to see more quarters of loss. Fannie Mae is also expected to continue to struggle. Fannie is also looking into more help from the Treasury Department’s senior preferred stock purchase program. It will be a long road ahead, but with Congress extending the first time home buyer credit, and other programs continuing, it is likely that the government will attempt to support the housing market for quite some time. The only question is whether or not the housing market will be able to survive without government help down the road.