WSJ: Economists expect Fannie, Freddie to require bailout

WSJ: Economists expect Fannie, Freddie to require bailout
Economists polled by the Wall Street Journal see a 59 percent chance that the government will be required to extend credit to Fannie Mae and Freddie Mac or purchase stock in the companies to keep them afloat. The majority of those polled Aug. 8-11 said that while they hope the government doesn’t have to bail the mortgage financers out, Fannie’s and Freddie’s big losses and continued problems in credit markets make the chances better than even. An online poll of Inman News readers finds them even more pessimistic, with 69 percent saying a government bailout of Fannie and Freddie is a certainty. More than two-thirds of economists polled by the Wall Street Journal said Fannie and Freddie should be pushed to raise more capital from the private sector.

Home mortgage rates barely budge
Mortgage rates posted little movement this week, still hovering below their year-ago levels, Freddie Mac reported in its weekly survey. The 30-year fixed-rate mortgage held at an average 6.52 percent (compared with 6.62 percent a year ago); the 15-year fixed mortgage dipped to 6.07 percent from 6.1 percent last week (compared with 6.3 percent a year ago); the five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) sank to 6.02 percent from last week’s 6.05 percent (compared with 6.35 percent a year ago); and the one-year Treasury-indexed ARM fell from 5.22 percent to 5.18 percent (compared with 5.67 percent one year ago).

To attain these rates, borrowers paid an average 0.7 point on the 30- and 15-year loans, while paying 0.6 point and 0.5 point on the 5- and 1-year ARMs, respectively.

Frank Nothaft, Freddie Mac’s vice president and chief economist, said in a press statement that according to the Federal Reserve, because "commercial banks tightened lending standards even more for prime, nontraditional and subprime mortgages in July" home sales activity could decline in the coming months.

California‘s new-home sales off 58% in June
The pace of sales at California new-home communities remained sluggish in June, following a resumed trend of deterioration in year-over-year sales declines that began in May, the California Building Industry Association reported today.

The monthly CBIA/Hanley Wood Market Intelligence (HWMI) New Home Sales and Pricing Report showed that new-home sales in June were 58 percent below June 2007. The drop represents a worsening in the trend of year-over-year decline, which had deteriorated to 51 percent last month after coming in at 44 percent in April. During June, 2,712 homes and condominiums were sold in the subdivisions tracked by HWMI, compared with 6,436 in June 2007. During the month, sales of single-family homes dropped by 54 percent, while sales of townhomes and "plexes" — duplexes, triplexes, etc. — were down 38 percent and sales of condominiums were down by nearly 75 percent. The median price of homes sold compared to last month was 4 percent lower at $365,000.

Jonathan Dienhart, director of published research for HWMI, notes the latest trend of decline means the rest of 2008 will likely be a struggle. "There are many uncertainties surrounding the health of the national economy," he said. "If we can avoid a recession over the next year, the housing market will have a better chance of recovering within 12-24 months, but at this point such a prediction would be a bit optimistic."

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