11 30 09
Real Estate by Lisa Scherzer
The Federal Reserve’s program to buy $1.25 trillion in mortgage-backed securities appears to have stabilized the housing market. Mortgage rates have been contained. That, in turn, has made homes more affordable — and put the brakes on the housing market’s plunge.
Rates on a conforming 30-year fixed loan dipped below the 5% mark last week, the fifth time they have done so this year, according to HSH Associates, a mortgage-tracking firm. Meanwhile, the S&P Case-Shiller home price index September reading showed a fifth consecutive month of gains with prices in 20 metropolitan areas rising a modest 0.3%, though prices overall recorded an 8.9% decline from a year ago.
But what will happen to mortgage rates when the Fed stops manipulating the market? The central bank has already extended the purchase program once, so it will now expire in March 2010 rather than the end of 2009. “The question is: Are they really going to stop the program next year?†says Richard Green, director of the Lusk Center for Real Estate at the University of Southern California.
In light of a weak economy, it seems unlikely. Unemployment is projected to remain in the double-digits well into next year, and foreclosures aren’t likely to let up soon. According to the Mortgage Bankers Association, a record 9.6% of all borrowers were delinquent on their mortgage in the third quarter. “The lesson learned in the last couple of years is whenever we get to the ‘end’ of these programs, someone comes up with another way to extend it,†says Michael Larson, a real estate analyst at Weiss Research.
Click here to read the full article …
