The National Association of Realtors said its Pending Homes Sales index, based on contracts signed last month, plunged 5.6 percent to the lowest level since December. The decline was the largest since May 2010. So what is the acting head of the Federal Housing Finance Agency want to do? See below about what he is thinking. Here is what I am thinking: I think that real estate sales have had a nice 2 to 2 1/2 year recovery run in the Richmond area and are pausing as we have hit a slow period of economic activity. The rise of mortgage interest rates towards the end of summer has certainly also helped slow the rate of home sales and home prices. The lessening of Pending Home Sales was at different rates throughout the country with the Northeast really slowing down and the South barely showing a decrease in Pending Home Sales. We seem to be in what I would term a Normal Seasonal Slow-Down in the Richmond Metropolitan area. Typically the rate of home sales and price of homes sold slow in the late Fall and Winter months. I believe this will be the case for us in Richmond in the aggregate. Certain pockets in upper priced communities in the city of Richmond, western Henrico and southeastern Chesterfield and homes in popular planned communities will weather the slowdown better than more moderately priced homes and homes in all price ranges in more rural areas. What could tremendously hurt real estate sales going forward into the 2014 is discussed below. If the FHFA lowers the maximum loan limits for Fannie and Freddie loans people may be forced out of the conventional loan market into the more expensive Jumbo loan market. While at first glance this seems to only affect higher priced homes, it will work its way down to all price ranges. As loans for higher priced homes become more expensive there will be less buyers in that price range and lower prices will soon follow as demand slackens. As demand slackens it will work its way down from higher priced homes all the way down into the first time home buyer price range. It is worth calling your US Senator and US Congressperson if you are worried about this regulator making policy changes that were not explicitly given to him in the bill passed to increase the Fannie and Freddie loan limits. Consumer Pushback might be the only way to stop this serious potential roadblock in housing. Without a prosperous housing market our economy remains dead in the water. I for one and getting tired of treading water!! I am ready to start swimming again!! How about you? The acting head of the Federal Housing Finance Agency continues to insist on lowering maximum loan limits for Fannie Mae and Freddie Mac despite opposition from industry groups and lawmakers. Speaking at the Mortgage Bankers Associations annual conference in Washington, D.C., Monday, FHFA Acting Director Ed DeMarco said the agency would probably announce loan limit reductions in November. Currently, Fannie and Freddie back mortgages with balances up to $417,000 in most of the country and $625,000 in more expensive markets. DeMarco has been making noises about lowering the loan limits since September, but he’s received massive pushback from within the industry and the government, especially with more stringent regulations hitting the market in January. As you probably know, last week I stated that understood the potential timing issues of such a change given the other regulatory changes, DeMarco said Monday. ...FHFA will give at least six months notice of any change, and any change will be measured and gradual so as not to disrupt markets. More than a dozen industry groups have gone on record opposing the plan. Indeed, groups representing real-estate agents, builders, mortgage bankers, mortgage insurers and title companies signed an Oct. 8 joint letter questioning whether FHFA had the authority to reduce the loan limits. “We believe such changes at this time would have a very disruptive impact on the availability of affordable housing credit, on our housing recovery and our economy as a whole. Not only is lowering loan limits bad for housing, we question to what extent FHFA’s authority would allow for such a change,” the letter stated. DeMarco maintains the FHFA has the authority to reduce the loan limits without congressional approval. Several members of the House of Representatives, however, beg to differ. “Congress did not give FHFA the authority to reduce the loan limits. In fact, we included language in statute explicitly stating that the loan limits could not be reduced,” Rep. Gary G. Miller (R-Calif.), said Oct. 10. Miller was one of 66 House members from both parties who signed a letter to DeMarco warning him to leave the limits alone. “Housing prices are on the rise, but lowering the loan limits could put the housing market’s fragile recovery at risk. This is not consistent with FHFA’s role as conservator,” Miller said. “Lowering the limits would place taxpayers at greater risk due to a decline in home values, ultimately harming (Fannie and Freddie’s) financial positions.” But DeMarco sees lowering the limits as a first step to redefining the role of the government-sponsored enterprises. What seems clear is that Fannie Mae and Freddie Mac will cease to operate in their current form at some future date, he said. With and uncertain future and a general desire for private capital to reenter the market, the overarching goal is that the role of the enterprises should be reduced over time.
Posted on: Mon, 28 Oct 2013 19:28:19 +0000
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