Tag: Housing Market

Housing Market Unlikely to Grow Without Government Guarantee

The majority of housing experts see little hope for the American mortgage market unless the government pledges to repay lenders.

A recent report stated:

“For the foreseeable future, there is simply not enough capacity on the balance sheets of U.S. banks to allow a reliance on depository institutions as the sole source of liquidity for the mortgage market.”

The report, entitled “Housing America’s Future: New Directions for National Policy,” was issued by a group of members of the housing establishment.

According to the panel, this is not an indictment of the American banking system, because it would prefer to trade leveraged derivatives then hold on to mortgage loans.

The report adds, “Given the size of the market and capital constraints on lenders, the secondary market for mortgage-backed securities must continue to play a critical role in providing mortgage liquidity.”

Investors are unlikely to to finance mortgages without a government guarantee.

 

Housing Prices on the Rise, Expected to Boost Consumer Spending

Housing prices in the U.S. have climbed to their highest rates in over six years, a strong indicator that the real estate market will have a large part in U.S. economic growth in 2013.

According to recent data, the S&P/Case-Shiller index rose 5.5% since the last quarter of 2011, the most significant growth since the summer of 2006. The progress is expected to continue as mortgage rates hover around a record low while property values rise. Experts believe this will boost consumer spending and sentiment, despite this month’s payroll tax increase.

Millan Mulraine, an economist at TD Securities, explains: “Rising home prices are providing an important cushion.” Lower confidence and reduced paychecks “will slow consumer spending this quarter, but the effect will abate in coming months,” she added. “The souring in moods is a reflection of the brinkmanship in Washington and the higher payroll tax.”

Michael McKee, economics editor at Bloomberg, discusses the recent developments in home prices here.