The Fed’s annoucement of buying longer-term treasuries is a nothing-burger for housing. Any benefit of lower mortgage rates will be scooped up by the lenders, not us. You might see an occasional high-3% offering, but is it even necessary?
I don’t think so, buyers are happy with the prospects of 4% mortgage rates.
The Fed/Gov needs to address consumer confidence, and none of these multi-billion dollar T-sprees are going to change how people feel about buying a house. They should do something for the folks who pay their bills on-time, save money in spite of 0% interest, and allow politicians to live cushy livestyles.
What can they do?
1. Ramp up foreclosures.
Don’t just issue a few extra NODs, let’s get down to business. Fannie/Freddie owns the most REOs, and the Fed/Gov pulls their strings. Let’s blow out sxome real volume, and show America that the government is about doing what’s right, for a change.
I am a REO listing agent for Fannie Mae, and not much is coming my way. This month I receives two more assignments, after a 6-week dry spell. Another 2-bedroom house in City Heights that was in short-sale limbo with a buyer who would have paid more than I’ll get for it. The other is a National City triplex clouded with title issues that will take months, if not years, to resolve.
The powers that be fear that more foreclosures would mean lower prices, why don’t they consider the disgust they are causing with buyers? The erosion of consumer confidence in our leaders is more damaging to the real estate market than expediting the foreclosure process – because plenty of buyers are going to wait this out until the shenanigans are done (chime in if you are one of those!).
The foreclosures are going to happen anyway, it’s just a matter of time – let’s have some market clearing and cause consumer to have more confidence in our leaders!
2. Declare a specific exit strategy from the mortgage market.
The Fed/Gov may not get out altogether, but whatever the policy is, put it on the table and let’s go. Private lenders aren’y going to surface until there is a need. There is no need if the government policy is to coddle the mortgage market.
3. Make decisons
Make specific policy about 1) allowing foreigners with means to emigrate if they buy a house, 2) MID, 3) increase/decrease capital-gains tax, 4) putting the Tan Man in jail.
If people sensed that there was clarity and direction in government policy, they’d be more likely to take positive action. With today’s psuedo-policy, people just want to put their dough in jars and bury it in the backyard.
The definition of leadership is ‘demonstrating the ability to lead’. Now is the time.
They should have left the market alone back in 2008. The pain would be over by now, but the Wall Street, K Street and the bankers wouldn’t have made their bonuses. Also, government at the local, state and federal level really don’t want to lose the tax base, but they have anyway.
Great post Jim.
I have been looking to buy for the last year, mainly in the Del Mar area but I see that prices havent come down a lot. I am not looking for a great bargain but I look at the price history and see the price disconnect from 2000 to 2006 and today.
I can justify a steady price increase in line with inflation from 2000 onwards but that will mean 2003 prices today. We are still a long way from that.
So I am prepared to wait, eventually things will return to fundamentals, if not renting is not so bad either.
I agree.
Protect the haves at the expense of the have nots. Fastest way to alleviate the wealth disparity is give up on protecting asset prices and default on the debt. The holders of debt are probably going to lose at some point, might as well be now.
The thing that sellers need to overcome is the fact that 2005-2006 prices weren’t real. It’s not just a matter of time.
I would also point out there is a distinct probability the transfer payments and grants California has been living on the last few years is coming to an end. It is going to hurt.
I AGREE…..put the Tan Man in jail….for a long, long time.
I understand that BofA is considering putting Countrywide into bankruptcy….then watch the fur fly!
Bruce Krasting disagrees with your analysis…
http://brucekrasting.blogspot.com/2011/09/wh-and-fed-sleeping-together.html
“I think that Treasury will announce the plans for a Mega Refi in the not too distant future. It could come this weekend or next week. Obama will wait just enough time after the complex Fed decision so that 99% of all people don’t connect these two dots.”
“They should have left the market alone back in 2008.”
If we’re going to talk should-haves, they should have left the market alone back in 2002.
I agree with the 2002 as well.
“I can justify a steady price increase in line with inflation from 2000 onwards but that will mean 2003 prices today. We are still a long way from that.”
I guess it depends on your neighborhood. Mine seems to be there now.