The Federal Reserve Board of Governors is maintaining interest rates at or around zero percent, as an incentive to lure home buyers back into the market. The Feds are also buying up mortgage paper, which is a purchasing binge that is scheduled to end fairly soon. Nevertheless, the message is clear that the government is trying to do everything it can to stabilize the housing market. Two weeks ago housing analysts were overly excited about the rise in consumer spending in the housing sector during the 2nd quarter of this year. The reality eventually set in and we are now forced to face the fact that there will be no miracles or swift recoveries waiting around the bend. The 30-year mortgage interest rates have declined in the last two weeks to 4.91 percent, down from 4.98 percent. Just one year ago the average 30-year mortgage interest rate was over 6 percent. There are signs that the housing market is improving, but we have previously noted that 80 percent of the FHA purchase loans this year have been first-time buyers, motivated by the tax incentives.
Determined to keep the ball rolling, the government has proposed a bill that will force banks to assist home owners who are facing foreclosure, in an effort to curtail the avalanche of foreclosures expected from the subprime loans underwritten in 2007 and 2008. Unfortunately, the Banking industry and real estate lobbyists’ made hefty donations amounting to over $350-million dollars to congressional campaigns during the height of the housing market, which may explain why the proposed bill appears to be on a slow path, and may never see the light of day. Let's hope, for the sake of the homeowners that will be facing foreclosure in the coming months, I am wrong.
k. Reilly
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