MaryAnn Dempsey: 5 Possible Interesting Predictions for 2011 Housing market

Sunday, December 12, 2010

5 Possible Interesting Predictions for 2011 Housing market

What do you think about these 5 Predictions for 2011?

I just read an interesting article that states; Freddie Mac analysts point to five features that they believe may likely characterize the 2011 housing and mortgage markets:

1) Low mortgage rates. While the Fed observers expecting the central bank to keep the federal funds rate at its current target range of 0 percent to 0.25 percent for most (or possibly all) of 2011, relatively low mortgage rates just could be a feature of the 2011 mortgage market. Thirty-year (30) fixed-rate loans are possibly likely to remain below 5 percent throughout the year, and initial rates of 5/1 hybrid adjustable-rate mortgages may possibly remain below 4 percent in 2011.

2. Prices have hit bottom. Home prices may possibly begin a gradual, but sustained recovery in the second half of 2011.

3. Homes will remain affordable. With affordability high, first-time buyers will be attracted to the home market in the New Year, likely translating into more home sales in 2011 than in 2010.

4. Refinances will probably dwindle. Many eligible borrowers will probably have already refinanced and the federal Making Home Affordable refinance program is expiring on June 30. While fixed-rate loans are likely to remain low, they may move up gradually, making it even less likely that refinances will be attractive to most home owners.

5. Delinquency rates will decline. Based on the last several business cycles, the share of loans that are 90 or more days delinquent or in foreclosure proceedings — known as the "seriously delinquent rate" — generally crests within a year of the start of the recovery in payroll employment, and this economic recovery appears to fit within that pattern. Payrolls began to rise last January, and by the spring the seriously delinquent rate had begun to fall.

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Report: U.S. Investigating S&P Over Mortgages

Another investigation as to whether Standard & Poor's improperly rated dozens of mortgage securities in the years before the financial crisis. The investigation began before S&P a downgraded long-term U.S. debt from a AAA rating to AA-plus this month. In the mortgage investigation, the Justice Department is asking about instances in which S&P analysts wanted to assign lower ratings to mortgage bonds but may have been possibly overruled by S&P business managers. Why would the Justice Department spokesman decline to comment on the story? S&P is not immediately responding to calls. It is not clear as to whether the Justice Department investigation is also involving other ratings agencies, such as Moody's Corp. and Fimalac SA's Fitch, or only S&P. I guess the paper quoted someone for S&P, via email that the agency had received several requests from different government agencies over the last few years and that it was cooperating with these requests. Despite the outcry over the ratings agencies' failures in the financial crisis, investors still rely heavily on ratings from the three main agencies for their purchases of sovereign and corporate debt, as well as other complex financial products. Some companies and some countries, but not the U.S., pay the agencies to receive a rating. For decades, the government issued rules that banks, mutual funds and others could rely on a AAA stamp of approval for investing decisions - which bolstered the agencies' power. A successful case or settlement against a giant like S&P could accelerate the shift away from the possible traditional ratings system. For instance, maybe the Dodd-Frank financial reform overhaul sought to decrease the emphasis on ratings, but bank regulators have been slow to spell out how the reform would work. S&P has been under fire from lawmakers, market players and the Treasury Department since its decision to cut the U.S. credit rating. The Securities and Exchange Commission was also reviewing whether S&P followed all of its policies leading up to the credit downgrade, according to sources familiar with the review. This blog is soley my opinion from the facts I have gathered via, the news only.

MaryAnn Dempsey

Sunday, December 12, 2010

5 Possible Interesting Predictions for 2011 Housing market

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