Signaling Confidence, Fed Holds Rates Steady

In an announcement that should bolster the housing industry, the Federal Reserve said Wednesday that it intended to keep key lending rates near zero “for an extended period” and continue to buy mortgage-backed securities and debt through March 2010.

That’s the second time the Fed has decided to stretch out its program to encourage spending and stimulate the economy.

Economists predict that the Fed will keep the key lending rate near zero into the first quarter of next year. Holding that rate low means that consumer loans, including mortgages, home-equity loans, and credit-card rates, remain at the lowest point in decades.

Greg McBride, senior financial analyst at Bankrate.com, warned that these low rates will eventually head higher and said home owners interested in refinancing should realize that “it could be a different story 12 months from now,” with much higher rates for 30-year fixed-rate mortgages.

Source: The Associated Press, Jeannine Aversa (09/23/2009)

Buyers who are under contract and hoping to close before Nov. 30 when the first-time home buyer credit expires should refrain from buying furniture and other things on credit.

Lenders are running credit checks prior to closing day and any increase in credit card or other debt can jeopardize the loan, says Lew Reich, an associate with Keller Williams Realty in Plano, Texas.

Reich warns buyers to even refrain from checking out a new large purchase because even an inquiry on a credit report could scare a lender.

Reich tells borrowers: “If someone’s squeaking by and, all of a sudden, they may be looking at increasing debt, the lenders will have a keener eye in looking at your loan,” he says.

“Don’t look until you’ve closed is basically what it comes down to. That’s the safest way. Stay out of the stores,” he adds.

Source: The Associated Press, Dawn Wotapka (09/18/2009)

Stock buying legend Warren Buffett is back in the market buying real estate brokerages. Barring a terrorist attach or some other such calamity he thinks the bottom of the housing market has passed. NOW MAY BE THE TIME FOR YOU TO BUILD OR PURCHASE.

Parts of his interview with Becky Quick of CNBC is below. Click on the link at the end for a full transcript.

“Oh, I think we’re certainly — we’re through the worst of it in residential real estate in all probability. And– and– and the reason is we’re building a lot fewer houses and we’re– and we’re forming households, so that solves itself over time. Doesn’t do it in a day or a week, but it solves itself. So we’re further on that. We’re gonna have unusual losses in credit cards and in commercial real estate, all of that. But we’re a lot better off than we were a year ago. I mean for one thing on some of the– some of the toxic assets have been flushed through. There’s been capital raised. There’s — we’re immeasurably better than we were– off than we were a year ago.”

“I think the odds are very much against getting significantly worse. It’s sort of plateaued at the– at the bottom right now, but if you got some horrible exogenous event, some– some, you know, 9/11– type event or worse– you know, you could have something that would be dis– really disruptive and start things all over again. But in terms of problems that we’ve identified and are working with, we’ve got more to come. But we’re– we’re– we’re past the– we’re past the critical point.”

“the world will come back. I’ve never been able to tell whether it’s gonna be a week or a month or — six months. But we are on the mend. And — and if you look at — at housing prices and activity in the mid to lower price range, it changed dramatically from a year ago. We’re seeing some stability.”

Click to link to review the actual transcript. Buffett talks to Becky Quick of CNBC (transcript HERE)

Now may be the best time to buy before the credit markets change and rates go up!

Credit Market Makes Economists Nervous
Interest rates are low and home prices are down, but banks continue to be stingy with loans.

At the height of the housing boom, seven out of 10 mortgages were approved. At the end of 2008, only five out of 10 got the green light. During the boom years, homebuyers could qualify for the cheapest rates with a credit score of 660. Today, they need 740 or better.

“Banks are going to be in a defensive posture for several years. Most borrowers can’t meet their criteria,” says Christopher Whalen, managing director at research firm Institutional Risk Analytics.

Consumers cut back borrowing by $21.6 billion from June to July, the biggest drop since the Federal Reserve began keeping records in 1943. That made some analysts nervous.

The reduction in borrowing could slow the economic recovery, says David Olson, president of Access Mortgage Research & Consulting.

“If they cut back, it would be catastrophic,” Olson says. “We could have a second downturn.”

Source: The Associated Press, Stevenson Jacobs (09/17/2009)

Check out the latest from the respected Economists of the National Association of Home Builders.

The Financial Markets Still Need Time to Heal

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Market Distress Peaked in October 2008

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The Feds to the Rescue

Facing the prospect of a financial market collapse, the Federal Reserve and the Treasury Department worked feverishly to provide liquidity to the financial markets, to prop up those entities that needed rescuing and to reassure the public. (more)

Financing for Housing Faces Major Hurdles

For about three years now, builders have faced increasing difficulty in obtaining AD&C loans. Not only have builders found it increasingly difficult to obtain these loans, but in many cases they have faced significant adverse changes to existing loans — including reductions in lines of credit, demands for increased equity for outstanding loans and, in some cases, demands for full repayment of outstanding loans. (more)

Is the Recession Over?

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Housing Continues to Struggle

Most of the news from the housing sector of late has been good, but it must be kept in perspective. (more)