New Jersey Real Estate Digest: Fannie Mae and the Fed Speak

Thursday, July 20, 2006

Fannie Mae and the Fed Speak

Real estate brokers have larger inventories than last year and it takes longer to match seller to buyer. Here it is from Fannie Mae economists David Berson and Molly Boesel:

"Total U.S. home sales will fall by eight to ten percent in 2006 as mortgage rates hit a five-year high…"

"Home price gains are expected to slow sharply this year, by 3.0%." MarketWatch: Robert Schroeder

What this means to the home seller is as I stated in Housing Market Recovers After Boom planning and timing are essential to meeting your goals. Whether you go FSBO or work with a real estate professional, getting a house sold takes a bit longer.

With the higher interest rates the amount of house buyers can afford in less. Mortgage loan interest rates are still on the rise and Fannie Mae a economist Berson and Boesel said “the central bank is likely to keep raising interest rates in the near term.” If the economists are correct then mortgage rates will continue to climb as well.

Federal Reserve Chief Ben Bernanke testified before Congress that inflation remains a concern and that the economy was likely to slow and that this should ease inflation pressures. It does not sound like we have seen the last of the rate hikes.

More ominous was his statement that the full impact of the past rate hikes has not yet hit the Nation’s economy. It makes the Berson and Boesel prediction sound credible. MarketWatch reports that applications for mortgages fell 4.6 percent last week which suggests that buyers are paying attention to interest rate news.

The real estate investor, particularly real estate investment trusts (REIT) seem a bright spot in the real estate industry. In a story by John Spence apartment REITs are expected to post the larger gains in a report due out next week.

Overall, we don't expect many surprises, but rather further confirmation that business is good with occupancy, rents and earnings on the rise," said Deutsche Bank analyst Lou Taylor.MarketWatch: John Spence

It remains to be seen what it all means for the single-family home market, mortgage rates, and real estate sales generally, in the near future.