Friday, January 01, 2010

WSJ: Five Key Housing Issues

by Calculated Risk on 1/01/2010 05:54:00 PM

Nick Timiraos at the WSJ writes: Five Key Housing Issues to Watch in 2010

Here is his list:

  • Mortgage rates. Timiraos discusses what will happen to mortgage rates when the Fed stops buying MBS.

  • Fannie, Freddie and the FHA. Timiraos discusses the uncertainty about Fannie and Freddie, and the expected tightening of FHA lending standards.

  • Loan modifications. The HAMP program has converted few borrowers to permanent status. Will there be a new flood of foreclosures and distressed homes when the HAMP trial period ends?

  • More loan resets. This is really about recasts. The key index rates - like LIBOR and the one-year Treasury - are so low, the resets don't matter. But for those paying interest only or with a negatively amortizing loan, a recast could mean a significantly higher monthly payment.

  • Tax credit and home sales. Timiraos wonders about the impact on the market when the tax credit ends.

    I reviewed the status of all these issues in Government Housing Support Update

    Although all of these issues are important, I'd probably start from a different perspective:
    1) What is the current supply situation and how will it be impacted in 2010?
    2) What will happen to demand?
    3) What will happen to prices?

    As an example, the loan modifications and more loan recasts impact supply, whereas higher mortgage rates, tighter lending standards, and the end of the tax credit will all impact demand. I'll try to address these issues in a 2010 housing overview soon.