Tag Archives: housing market

Feds Want to See More Fannie Mae and Freddie Mac Help in US Housing Market

Economy, , , , , ,
Fannie Mae

The Federal Reserve Board told Congress this week that Fannie Mae and Freddie Mac, both government-run mortgage finance companies, could be instrumental in helping to get the wallowing US housing market back on track.

Not All Agree

The proposal to use the government mortgage companies to improve the housing situation  threatens to run into hurdles from politicians opposed to the idea.

The Federal Reserve sent a paper to the legislators on Wednesday describing concrete steps which the government can take to help jump-start the lackadaisical housing market, including letting Fannie and Freddie provide affordable mortgages to a larger number of potential homeowners.

Freddie and Fannie Problematic

It is not so simple, however. The two mortgage companies were seized by the government over three years ago as they were about to fall apart despite the fact that they are the biggest sources of US mortgage funding. Since then they have been held together with $169 billion in taxpayer money, making them an easy target of lawmakers on the Hill.

Obama Not So Sure

Even the Obama administration has expressed a desire to reduce the role the government plays in housing finance. Such a reduction was part of a three-pronged program to reform the US finance system that Obama’s administration laid out last year.

“It comes at a time that Congress has become quite skeptical of Fannie and Freddie and their role, and seems to be looking for ways to diminish their long-run role in housing finance, not increase it,” said David Resler, chief economic adviser at Nomura Securities International.

Fourth Quarter Looking Good for Economy

Economy, , , ,

Analysts are expecting close to a 3.5% growth during the 4th quarter of 2011. After a lackluster 3rd quarter, this news is giving a happy feel to the holiday season.

Feds Will Ignore for Now

It is expected also that due to the good 4th quarter showing the Federal Reserve Bank will not be easing their monetary policy, at least in the immediate future.

There are still fears that not all will be well, especially considering the difficult situation in Europe which will hinder US economic growth and the fiscal burden here at home, it might not be feasible for the economic improvement to be able to sustain itself.

Home Sales Up

Adding to the optimism is the data about home sales for last month, which showed a rise of 4 percent, to a seasonally adjusted annual rate of 4.42 million sales. The number is lower than the 6 million sales economists believe is a number more consistent with a healthy housing market, but it is still an improvement. It is considerably ahead of the data from 2008, now recognized as the worst year for housing in 13 years.

The data is collected and analyzed by the National Association of Realtors, which has had to revise many of its numbers due to several factors, including “changes in the way the Census Bureau collects data, population shifts and some sales being counted twice.”

Major Data Revisions Needed

The NAR is a private trade group which helps economists take the pulse of the US housing market. They say that they had to revise down its sales from 2007 until this October by about 14%, from 24.8 million down to about 21.3 million.

John Ryding is an economist at RDQ Economics. He labeled the data revisions as “massive” and said that this is a perfect example of how economic data can often be unreliable.