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What is Trump’s Plan for Privatizing Fannie Mae and Freddie Mac?

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Donald Trump's renewed interest in privatizing Fannie Mae and Freddie Mac has reignited a long-standing debate about the future of the U.S. housing market. In short, the plan to free Fannie Mae and Freddie Mac likely means increased risk and potential instability in the housing market, at least in the short term. The impact on homeowners, buyers, and the overall economy could be substantial depending on how privatization is executed. Let's dive deeper into what this could entail.

What is Trump's Plan Regarding the Privatization of Fannie Mae and Freddie Mac?

Why Should You Care About Fannie and Freddie?

Before we get into the nitty-gritty, let's understand why Fannie Mae and Freddie Mac are so important. Think of them as the unsung heroes (or villains, depending on your perspective) of the mortgage world. They don't directly lend money to you and me, but they buy mortgages from lenders, package them into mortgage-backed securities (MBS), and sell them to investors. This process does a few crucial things:

  • Keeps money flowing: By buying mortgages, they replenish lenders' funds, allowing them to issue more loans.
  • Makes mortgages more affordable: Their guarantee reduces the risk for investors, which translates to lower interest rates for borrowers.
  • Standardizes mortgage lending: They set guidelines for the types of mortgages they'll buy, which encourages consistent lending practices across the country.

Essentially, they make sure there's enough money available for people to buy homes and that those homes are reasonably priced. They currently back around 70% of the mortgages in the US.

A Quick History Lesson: The 2008 Crisis and Conservatorship

To really grasp what’s at stake with Trump's plan, we need to rewind to the 2008 financial crisis. Fannie Mae and Freddie Mac were major players in the subprime mortgage market. When the housing bubble burst, they were holding a ton of risky loans that went bad. To prevent a complete collapse of the housing market, the government stepped in and placed them into conservatorship.

This meant the government took control, injected billions of dollars to keep them afloat, and essentially guaranteed their obligations. Since then, they've been operating under government oversight, slowly rebuilding their capital reserves.

What's the Plan Now? Deeper Dive

Now, let's get to Trump's plan. While the details remain a bit hazy, the basic idea is to end government control and return Fannie and Freddie to private ownership. This could involve:

  • Releasing them from conservatorship: Letting them operate independently without government oversight.
  • Recapitalizing: Allowing them to raise capital from private investors to build up their financial strength.
  • Adjusting their business model: Potentially limiting their role in the mortgage market to focus on specific types of loans.

The motivation behind this push seems to be a desire to reduce the government's role in the housing market and promote a more competitive environment. It is aimed at removing the implicit government backing that the entities currently have. However, the mechanics of how this will work are not clear, especially since previous attempts to legislate this have failed.

What Are the Potential Impacts? The Good, the Bad, and the Uncertain

Privatizing Fannie and Freddie is a complex issue with potentially far-reaching consequences. Here's a look at some of the key areas that could be affected:

1. Mortgage Rates:

  • The Concern: Without government backing, investors may demand higher returns for investing in mortgage-backed securities (MBS). This could lead to higher mortgage rates for borrowers.
  • The Optimistic View: A more efficient, privately-run Fannie and Freddie could potentially innovate and reduce costs, which could offset some of the upward pressure on rates.
  • My Take: I think mortgage rates will likely increase, at least initially. It is very difficult for private players to replicate the same guarantees without increasing the costs, and this increased costs will likely be passed on to the homeowners.

2. Mortgage Availability:

  • The Concern: A more cautious, privately-owned Fannie and Freddie might tighten lending standards, making it harder for some people to qualify for a mortgage.
  • The Optimistic View: Private companies may be more willing to take on innovative lending products that could help more people access homeownership.
  • My Take: I think the initial reaction will be conservative, as lenders become more risk-averse.

3. Housing Prices:

  • The Concern: Higher mortgage rates and tighter lending standards could cool down the housing market, leading to slower price growth or even price declines.
  • The Optimistic View: A more stable and predictable mortgage market could lead to more sustainable home price growth in the long run.
  • My Take: While a dramatic crash seems unlikely, I expect a period of price stabilization or modest declines in some markets.

4. Taxpayer Risk:

  • The Concern: Without government backing, Fannie and Freddie could potentially fail again, requiring another taxpayer bailout.
  • The Optimistic View: Privatization could eliminate the risk of future bailouts, shifting the risk to private investors.
  • My Take: This is the biggest potential benefit. If done right, privatization could protect taxpayers from future losses. But it also means the housing market is more exposed to market forces.

5. The Role of Community Banks:

  • The Concern: Smaller community banks may find it harder to compete with larger, private institutions, potentially reducing access to credit in some areas.
  • The Optimistic View: A more diverse mortgage market could create new opportunities for community banks to specialize in specific types of loans.
  • My Take: This is a valid concern. Regulations need to ensure that smaller lenders can still participate in the market.

Here's a quick summary in table format:

Impact Area Potential Concern Potential Benefit
Mortgage Rates Higher rates due to increased risk Lower rates due to efficiency gains
Mortgage Availability Tighter lending standards More innovative lending products
Housing Prices Slower growth or price declines More sustainable price growth
Taxpayer Risk Potential for future bailouts Elimination of bailout risk
Community Banks Reduced access to credit in some areas New opportunities for specialized lending

Who Benefits, and Who Loses?

Privatization will likely create winners and losers:

  • Winners:
    • Private investors: Could profit from investing in a privatized Fannie and Freddie.
    • Taxpayers (potentially): Could be shielded from future bailouts.
  • Losers (potentially):
    • Homebuyers: Could face higher mortgage rates and tighter lending standards.
    • Homeowners: Could see slower home price appreciation.
    • Smaller lenders: Could struggle to compete with larger institutions.

The Million-Dollar Question: How Will It Be Done?

The biggest uncertainty surrounding Trump's plan is how it will be implemented. There are several key questions that need to be addressed:

  • What kind of regulatory framework will be put in place? Strong regulation is needed to prevent excessive risk-taking.
  • Will there be any form of government guarantee? A limited government backstop could help stabilize the market during times of crisis.
  • How will they be recapitalized? The method of recapitalization could affect the value of existing Fannie and Freddie shares.

The answers to these questions will ultimately determine the success or failure of the plan.

My Personal Thoughts and Concerns

Having followed the housing market for many years, I have mixed feelings about this plan. On the one hand, I agree that reducing the government's role in the housing market is a worthwhile goal. The current system creates moral hazard, where Fannie and Freddie can take on excessive risk knowing that the government will bail them out if things go wrong.

On the other hand, I'm concerned about the potential for unintended consequences. A poorly executed privatization could destabilize the housing market, making it harder for people to achieve the dream of homeownership. The risk of higher mortgage rates and reduced access to credit are real and should not be dismissed lightly. The new entities need to be very well regulated, and given the political climate, I think that the chances of effective regulation are minimal.

Ultimately, I believe that a gradual and well-planned transition to a private system is the best approach. It is important to proceed with caution and carefully consider the potential impacts on all stakeholders.

What Should You Do?

Given the uncertainty surrounding Fannie and Freddie, here's my advice:

  • Stay informed: Keep up with the latest news and developments.
  • Be prepared: If you're planning to buy a home, be prepared for potentially higher mortgage rates.
  • Don't panic: The housing market is resilient, and it will adapt to whatever changes come its way.

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Mortgage Rate Expectations Fuel Housing Market Optimism

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Is the housing market a mystery wrapped in an enigma? Not exactly, but it sure feels that way sometimes. The housing market is a complex beast, influenced by everything from interest rates to job security, and right now, it's a mixed bag of emotions for buyers and sellers alike.

While it's definitely not a straightforward path to homeownership, there are some emerging trends and key indicators that offer valuable clues for anyone trying to navigate this tricky terrain. The consensus seems to be that while the market is still competitive, there's a growing optimism about potential improvements in the coming year, particularly regarding mortgage rates.

Mortgage Rate Expectations Fuel Housing Market Optimism

Let's be real for a second, the housing market isn't just about numbers and graphs; it's deeply personal. I've been watching this market closely, not just as an analyst but also as someone who remembers the stress of house hunting. There’s so much more to it than just crunching figures. People are putting their lives on hold, dreaming of starting families, or finally getting that dream home. So, when the market throws curveballs, it impacts real people and their futures.

Right now, it's like we're on a rollercoaster that keeps climbing with no exciting rush of speed. The good news? Many people are feeling more optimistic compared to this time last year, largely because there's a whisper of hope for lower mortgage rates in 2025. The bad news? We've all been burned before, so it's crucial to stay informed about the latest trends and changes. This article will delve deeper into the nuances of the current housing market, cutting through the noise and offering some plain, straightforward insights.

Understanding the Current Vibe

So, what’s the current temperature of the housing market? Let's break it down:

  • Optimism is Up, but…: Consumer sentiment is definitely trending upward compared to last year, which is great. But, that enthusiasm dipped slightly in December from its November high, suggesting it can easily move in the opposite direction if those mortgage rates don't start to chill. It's like we're all holding our breath, hoping for the best but knowing the market can be unpredictable.
  • Mortgage Rate Expectations are Key: The biggest driving force behind this optimism is that people are expecting mortgage rates to come down in the next 12 months. Specifically, 42% of consumers surveyed believe this, and this is a huge jump from last year's 31%. These numbers are significant because mortgage rates have a huge impact on what people can afford. The recent tick up to 7.14% has me cautious – we need to pay close attention to upcoming labor reports and more details about Trump's tariff plans because that's what's going to dictate where the rates are actually headed.
  • Still a Competitive Market: Don't get me wrong; while people are feeling hopeful, they also seem to understand that the market is still very challenging for buyers. Only 22% of respondents think it's a good time to buy, while a whopping 63% believe it's a good time to sell. This shows that the market is still leaning toward the sellers, and we may not be out of the woods yet when it comes to competition.
  • Price Expectations are Mixed: Here's where it gets a little tricky. More people (38%) expect prices to go up than those who think they'll go down (27%). The difference is not so big though and it shows there's definitely some uncertainty in the air about where home prices are heading. As I have personally seen in my area, prices have been stagnating if not declining.
  • Financial Stability Remains Stable: Employment and income metrics haven't changed too much recently. About 77% of employed people aren't worried about losing their jobs, and 17% say their income has significantly increased. That means that people have money to spend, which is a good thing for the market. However, the lack of change is also concerning since it also is keeping demand relatively stable, and not pushing demand lower.

The Fannie Mae Home Purchase Sentiment Index (HPSI) – A Deeper Dive

Let's talk numbers. The Fannie Mae Home Purchase Sentiment Index (HPSI) is a key indicator we can't ignore. It summarizes the overall consumer sentiment about the housing market. Here's what it shows for December 2024:

  • Overall Score: The HPSI stands at 73.1, which is lower than November, but significantly higher than the same time last year. This shows that while optimism is still present, it's a bit shaky.
  • Buy/Sell Sentiment: Only 22% think it's a good time to buy, whereas 63% think it’s a good time to sell. This disparity highlights that the market is still tilted in favor of sellers. I would personally feel hesitant in the current market to buy, and feel the risk of overpaying is high, especially in popular areas.
  • Price Expectations: 38% of people expect prices to rise, while 27% think they’ll decrease. This difference is quite high, indicating a lack of consensus on price movement. As a potential buyer, I would keep an eye on the median price movements in my target neighborhoods, to see if the predictions match up.
  • Mortgage Rate Expectations: 42% expect mortgage rates to drop, although this is down slightly from 45% last month, but a significant jump from 31% last year. This is the biggest driver of overall sentiment, and it's something we'll all need to watch closely. The slight decline from last month is a bit concerning, since it shows that this number can fluctuate rapidly.
  • Job Security: 77% are not concerned about job loss, and that number has not changed much from the previous month. This indicates that people are confident about their ability to pay their bills, which can have a positive impact on the housing market.
  • Household Income: 17% reported that their income has significantly increased, indicating that consumers have more purchasing power, and are able to consider higher prices if the opportunity is right.

Key Takeaways from the HPSI:

Component December 2024 Month-over-Month Change Year-over-Year Change
Overall HPSI 73.1 -1.9 +5.9
Good Time to Buy 22% -1% +8%
Good Time to Sell 63% -1% +10%
Prices Will Go Up 38% 0% +7%
Mortgage Rates Will Go Down 42% -3% +11%
Job Loss Concern 77% -1% +1%
Household Income (Higher) 17% +1% +6%

My Thoughts on What It All Means for the Housing Market

Here’s where I step off the data and share my personal view. Looking at these numbers, here's what's on my mind:

  • Hope vs. Reality: The optimism is a good sign, but I'm not ready to throw a party just yet. I've seen these hopes get dashed before. The real test will be whether those mortgage rates actually come down. The drop in the expectation rate from last month to this month is an indication that sentiment can change very fast. This means buyers cannot be complacent and need to keep a very close eye on things.
  • Sellers Have the Advantage, for Now: It's clear that it's still largely a seller's market. If you're trying to buy, be prepared for a tough fight. If you're selling, now might be your best chance to get your price. The data here seems to indicate that it is still a very competitive market, which is a challenge for buyers but good for sellers. However, I wonder if this situation will last for long, and whether it is wise to try to make a sale in such a competitive market. Personally, I would wait to see where things are headed, and not feel too rushed to sell.
  • Affordability is the Real Issue: The core problem is still affordability. Prices need to cool down, and wages need to catch up, but the market is not there yet. Even if mortgage rates dip, home prices are still high. Wage growth is not keeping up with house prices, which is bad for people who are struggling to make a down payment. As a potential first-time home buyer, I would be hesitant to jump into the market right now, given the challenges.
  • Local Markets Matter: The overall picture doesn't always tell the full story. Your local market might be behaving differently than the national trends. It's important to do your research and get a good handle on your specific area. I would focus less on the bigger market numbers, and instead on what is happening in my area. The same is also true when selling – you need to know what's happening in the local area before putting the property up for sale.
  • Savvy Buyers Will Win: In this market, you need to be smart. Don't jump into any deal without doing your homework. Shop around for the best mortgage rates, be flexible on location, and be patient. The data indicates that the market is very competitive, and not everyone will get a good deal. Buyers should be on their toes.

Looking Ahead to 2025: A Glimmer of Hope, but Not a Guarantee

So what’s on the horizon? Fannie Mae is predicting a modest decline in mortgage rates, a slowdown in home price growth, and a rise in wages in 2025. If all this happens, then it will improve the affordability for potential buyers. However, this also means that the market will remain competitive, and savvy buyers are likely to come out on top.

Here's What I Think 2025 Will Be Like:

  • Mortgage Rate Watch: Keep a close eye on those mortgage rates. If they actually decrease as expected, the market dynamics will shift.
  • Price Adjustment: Home prices may slow down, which will give buyers some much-needed breathing room.
  • Wage Growth is Crucial: For any significant change, wages need to go up, too. Otherwise, there will still be a large number of people who won't be able to afford a home.
  • Competitive Market Remains: Even with improvements, it will still be a tough market for buyers. Be prepared to move quickly if you see the right property.
  • Local Knowledge: Don't neglect the local level. Knowing your specific area and neighborhood will give you an edge. I would even talk to my neighbors and find out what's going on, as they will be the best source of information about local conditions.

Advice for Buyers and Sellers

Whether you are looking to buy a home or to sell a home, here is some advice for you.

Advice for Buyers:

  • Get Pre-Approved: Before you start looking, get pre-approved for a mortgage. This will show sellers you’re serious, and it will make the closing process faster. This also helps you figure out what you can actually afford, so you don't waste time on properties you can't afford.
  • Shop Around: Don't settle for the first mortgage rate you see. Shop around and compare different lenders. Be prepared for rates to be high, but always be on the lookout for better deals.
  • Be Patient: Don't feel rushed to jump into any purchase, and do your due diligence before taking the plunge. If you have your options, take your time and find the right property.
  • Stay Informed: Keep up to date with market trends and local news. The more you know, the better decisions you’ll make. I would sign up for newsletters from real estate firms, and also follow news on social media to see what's happening.
  • Consider Compromises: Be open to different locations, types of properties, and features. Being flexible may help you find that hidden gem. Be practical and try to find something that suits your needs, but also matches your affordability.

Advice for Sellers:

  • Price it Right: Work with a real estate professional to determine the right price for your home. Don't overprice or underprice. I always look at comparable homes that have sold recently to understand what might be a good price.
  • Present it Well: Make sure your home is clean, well-maintained, and in its best condition before listing it. The competition is high, so you want to be noticed for all the right reasons.
  • Be Patient: The market might fluctuate, so don't feel rushed to accept the first offer. Be smart and see what else comes your way.
  • Consider Upgrades: Think about making minor improvements that will make your home more attractive to buyers. Focus on repairs and renovations that add the most value to the house.
  • Stay Flexible: Be ready to negotiate with potential buyers. It can be a give and take in this market.

Conclusion: Staying Informed and Adaptable is Key

The housing market is still very much a puzzle. While there’s a sense of optimism for lower mortgage rates in 2025, the market continues to be competitive. The best strategy is to stay informed, do your research, and make smart decisions based on your personal situation and goals. Don't be afraid to seek expert advice if needed, and be patient with the process.

Fannie Mae’s Housing Market Forecast for 2024 and 2025

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Fannie Mae has revised its forecast for 2024. In the wake of turbulent oscillations and a deviation from historical norms, the housing and mortgage markets are anticipated to revert to a more typical pattern in 2024. The volatility in mortgage rates and lingering effects of the pandemic resulted in an unusual juxtaposition in 2023: the lowest pace of existing home sales since the Great Financial Crisis, depressed mortgage originations, yet robust new home construction and solid home price growth.

Several dynamics prevalent in 2023, including stretched affordability, the “lock-in effect,” and limited supply, are expected to persist into 2024. However, the projection indicates that moderating mortgage rates, a decelerating economy, and diminishing effects from the 2020-21 period's surge in home purchase activity will lead to a thawing of the existing homes market.

This, in turn, is anticipated to prompt a shift towards a more balanced housing market. The forecast suggests a recovery in existing home sales, moderated home price growth, and a stabilized level of new home construction. Growth in mortgage originations is also expected, with a total single-family mortgage originations forecast of $1.98 trillion in 2024 and $2.44 trillion in 2025, marking an increase from $1.50 trillion in 2023.

Despite the recent easing in financial conditions, the macroeconomic backdrop still indicates below-trend growth and a heightened level of uncertainty. Notably, the expectation of a 2024 recession has been removed from the baseline forecast, reflecting a more optimistic outlook.

Forecast Shows Moderation in Home Price Growth in 2024

As per the Fannie Mae Home Price Index, home prices concluded 2023 with a 7.1 percent increase on a Q4/Q4 basis. This robust pace of growth, amid rising mortgage rates and worsening affordability conditions, is noteworthy. While the moderation in mortgage rates is anticipated to support home prices, historical challenges in affordability are expected to persist. Coupled with a cooling labor market, the ability of homebuyers to drive prices upward is foreseen to be more limited.

The anticipated unfreezing of the existing home sales market and an increase in the supply of new homes are expected to alleviate market pressures. A potential decline in multifamily rents across the country is also likely to make renting multifamily units more favorable, thereby reducing the upward pressure on single-family home prices.

Thawing of the Existing Home Sales Market

Despite expected stretched affordability and a tight supply of homes for sale, a decline in mortgage rates is predicted to initiate the thawing of the existing home sales market. This market was hindered in 2023 by strong lock-in effects. The trend of homebuyers and sellers in 2020 and 2021 advancing their moving plans to capitalize on low mortgage rates and remote working options is expected to diminish over time. As this effect wanes, coupled with existing homeowners who delayed moves in 2023 due to high mortgage rates, an increase in home sales is anticipated.

While a sluggish pace of existing home sales is still foreseen due to affordability challenges and limited supply, successive quarterly sales increases are projected in 2024. Sales are expected to conclude the year around 4.5 million annualized units in Q4, compared to the year low of around 3.8 million annualized units in Q4 2023. The annual forecast indicates a 3.1 percent rise in existing sales for 2024.

Single-Family Home Construction Strengthens, Multifamily Takes a Pause

The resilience of single-family home construction throughout much of 2023 surpassed expectations. While the unfreezing of the existing sales market is expected to bring balance to homebuyer interest in both new and existing homes, the overall housing stock remains limited compared to historical demographic trends. This limitation stems from a decade of underbuilding following the financial crisis. The peak first-time homebuying age for Millennials also continues for a few more years, contributing to sustained demand.

Recent data on residential housing construction employment indicates an expanding homebuilding industry. Consequently, the projection is for new construction to maintain its strength, with a forecast indicating that 2024 single-family housing starts will be 5.7 percent higher than those in 2023.

In contrast, the slowdown observed in multifamily construction in 2023 is anticipated to persist into 2024. Weak rent growth, influenced by a historically high influx of new supply into the market, is a key factor. Despite the overall scarcity of housing supply, 2024 is projected to be a breather following the rapid pace of starts in 2022. The forecast for the year indicates a significant decline, with multifamily housing starts expected to fall by 18.3 percent in 2024.

Insights into Homebuying Demographics and Industry Expansion

Millennials, a significant cohort in the homebuying demographic, continue to be at the peak first-time homebuying age. This demographic trend, combined with sustained underbuilding over the past decade, contributes to the persistent demand for single-family homes.

Moreover, recent data on residential housing construction employment indicates a positive trend in the homebuilding industry. The expansion in employment within this sector reinforces the expectation of a robust single-family home construction market in 2024.

Challenges in Multifamily Construction and Rent Dynamics

The multifamily housing sector faces challenges, with a slowdown in construction expected to extend into 2024. Weak rent growth, attributed to a substantial influx of new supply, is a contributing factor. Although the overall housing supply remains insufficient, the forecast suggests a temporary slowdown in multifamily housing starts during 2024.

While a breather is expected in 2024, the long-term outlook for multifamily construction remains positive over the next five years. The ongoing scarcity of housing supply is likely to drive solid multifamily construction beyond 2024.

In summary, the housing market in 2024 presents a nuanced landscape, with single-family home construction maintaining strength, driven by demographic trends and industry expansion, while multifamily construction takes a brief pause, responding to rent dynamics and the recent surge in supply.

Fannie and Freddie Delisted! What Does it Mean for Real Estate?

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You might have missed this little item in the nightly news report; government home mortgage giants Freddie Mac and Fannie Mae are delisting from the New York Stock Exchange. Despite $145 billion in taxpayer funds spent to shore up the pair, shares have dropped so significantly they no longer qualify for inclusion on the exchange but will continue to be traded via the infamous bulletin board instead.

In order to participate in the traditional exchange, shares must trade above $1…Fannie has been below that level for well over a month making delisting a legal necessity. Freddie has continued to struggle at just over the $1 level but will also be delisted given the eventual prospects. Given the difficulty of becoming profitable…much less an actual attempt to repay the government aid, it's unlikely any serious effort to revive the failing entities will be forthcoming.

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Ben Bernanke: "Dumbass of the Decade?"

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Ben Bernanke, "Time Magazine’s Man of the Year".

How about “Dumbass of the Decade?”

You just can’t make this stuff up! This choice by Time Magazine displays the collusion between the government and the main stream media. Bernanke as "Person of the Year" is almost as bad as President Obama receiving the Nobel Peace Prize.

I believe in the next year or so it will become apparent to all the "sheeple" out there, who just gobble up all the BS from the main stream media as the truth, that Ben Bernanke is actually "Dumbass of the Decade" instead of "Man of the Year" when everyone realizes what he actually did with our money. The only true way to find out what he did is to audit the Fed. Unfortunately, if the Fed were audited today we would probably have another stock market crash when everyone realizes where all the money went to.

The Dumbass Bernanke Timeline:

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Government Handcuffs Real Estate Investors

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Leave it to the government to take a crippled housing market (which they helped destroy) and make it worse by prolonging its recovery.

Regulators have taken a loose and passive role watching the housing bubble inflate.  Now, true to their nature, regulators are making the problem worse with their slow response and lack of real-world solutions.

, in my opinion, have been unfairly squeezed by the ever tightening underwriting guidelines.  We are dealing with larger down payments, higher credit scores, larger cash reserves, and lower debt-to-income ratios.

As a , Fannie Mae and Freddie Mac require you to have a bullet proof credit profile to even be considered for financing. When you consider that investors put up a larger down payment than most home buyers, require better credit, and typically research and with a cash-on-cash return, lenders and regulators should be more willing to finance these solid transactions. They would also help solve the housing crisis by reducing the excess foreclosure inventory sought by rehabbers and wholesalers.

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When Will Mortgage Interest Rates Increase?

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Maze-Interest-Rates On November 19, 2009 Freddie Mac recorded an average 30 year mortgage rate at 4.83%, down from 4.91% the previous week. Just over one year ago, the 30 year mortgage rate averaged 6.04%.  So long as you have solid credit and a 20% down payment, whether or homeowner, this time in history is certain to mark historic lows for home buying.  In addition, those who still have equity in their property can take advantage of an incredible refinance opportunity.

Mortgage companies have seen steady rises in applications for refinance, but certainly not at the volumes seen just two years ago. Why isn't everyone flocking to refinance? The answer is quite simple, homeowner appraisals are often below the requirements needed to refinance and many homeowners are dealing with loss of income due to unemployment or wage cutbacks. The only solution is for the economy to pick up and create more jobs along with more competition for increased wages. Unfortunately such a task, although eventually likely, is not in the near future. Economists across the nation are predicting additional declines in jobs during the first quarter of 2010. Job creation is likely to remain slow during most of 2010.

Yet there is still a silver lining to the doom and gloom. It is likely that the federal government will do all they can to keep interest rates low up until actual job creation becomes more robust. Interest rate hikes over the next 6 to 9 months will only occur if outside-international influences force the hand of our financial markets to increase rates. Although a remote chance of this exists, I for one believe we have another year of healthy-low interest rates within the real estate market. Once rates do inch up it is likely to be welcome, so long as inflation remains tame and not hyper.

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The Housing Market is About to Get Even More Oversupplied

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While both the media and stock investors believe that housing has bottomed, they are unaware of the massive supply of homes that are already in the foreclosure process that will certainly drive home prices down even further when they are sold. We have been projecting a “W” shaped recovery for some time, and we are becoming even more convinced that we are right. The shape of the second leg down is almost completely dependent on the level of government intervention that will take place.

For a number of reasons, banks have not been aggressively taking title to homes and selling them, which has resulted in very few distressed sales in comparison to the actual level of distress in the market. This delay in REO sales, along with historically low mortgage rates and an $8,000 tax credit, has helped to stabilize the housing market – temporarily.

It is very clear that price stabilization is temporary unless something is done. Here are some facts to help project what housing will be like in 2010:

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