FHA - The Only Game in Town?

As reported by Realty Times:

"The country's top housing official has an urgent message for potential home buyers: You may have heard that the credit markets were 'frozen,' but FHA has been open for business throughout the credit squeeze, and so are Fannie Mae and Freddie Mac. In fact, FHA's volume has tripled and the agency is now insuring well over a hundred thousand new loans a month.

In an exclusive one-on-one interview with Realty Times, Housing and Urban Development Secretary Steve Preston said that FHA, Fannie and Freddie -- who account for a combined 90 percent plus share of the entire U.S. mortgage market -- 'have kept liquidity alive' for home buyers -- and have virtually unlimited funds for new mortgages.

'There is no credit crisis' for individual home buyers who have at least three percent to put down, documentable employment, and at least a moderately good credit record, said Preston."

We might add that we're definitely noticing this trend with our real estate projects. A major contributing factor is that FHA still only requires a minimal down payment which continues to enable a market that would otherwise no longer exist in consideration of our current credit environment.

Mortgage Rates Popped Higher This Past Week

Freddie Mac reported in it's "Primary Mortgage Market Survey (PMMS)" that mortgage rates pushed significantly higher during this past week:

"... 30-year fixed-rate mortgage (FRM) averaged 6.46 percent with an average 0.6 point for the week ending October 16, 2008, up from last week when it averaged 5.94 percent. Last year at this time, the 30-year FRM averaged 6.40 percent. This week's increase of 52 basis points was the largest weekly increase since the week ending April 17, 1987, when the 30-year FRM rose 84 basis points.

The 15-year FRM this week averaged 6.14 percent with an average 0.6 point, up from last week when it averaged 5.63 percent. A year ago at this time, the 15-year FRM averaged 6.08 percent.

Five-year Treasury-indexed hybrid adjustable-rate mortgages (ARMs) averaged 6.14 percent this week, with an average 0.6 point, up from last week when it averaged 5.90 percent. A year ago, the 5-year ARM averaged 6.11 percent.

One-year Treasury-indexed ARMs averaged 5.16 percent this week with an average 0.6 point, up from last week when it averaged 5.15 percent. At this time last year, the 1-year ARM averaged 5.76 percent."

Mortgage rate averages as noted by region:


Will we continue to see rising rates?

The Bailout, Real Estate ... An Uncertain Future?

Today the House agreed to the new bailout bill, 263 Democrats to 171 Republicans. The government tells us that the intent for this bill is to help liquidate a frozen credit market.

The current credit markets are so tight that some business owners are now struggling to obtain financing for simply keeping their businesses afloat let alone business expansion.

Ben Bernanke said "the legislation is a critical step toward stabilizing our financial markets and ensuring an uninterrupted flow of credit to households and businesses."

The said result, foreclosures should begin to subside since we should be able to obtain loans again as banks begin lending with new confidence as the government soaks up their bad debt. As loans become more available, it is believed that there is a pent-up demand for housing and Americans will begin to purchase residential real estate again at their current bargain basement prices in many housing markets. As we begin to purchase more homes, the inventory will subside and prices should begin to stabilize before the demand and shrinking inventories ultimately begin to put upward pressure on housing prices.

Time will only tell if these favored results will actually begin to positively affect our housing market. Unfortunately, this bill is laden with nearly $150 Billion in "pork" legislation and does not address many of the issues that ultimately lead us to this point.

We must demand more of our government but can begin by demanding more from ourselves ... if there ever was a time to pay attention!