Thursday, December 4, 2008

Is The Housing Market About To Turn?

I know it is fashionable to be bearish on housing, but are things about to pivot and turn? Put these two items together:

1) The Housing Affordability Index reached 141.1 in the most recent release. This was the highest in at least six years. As one blogger noted, this will move even higher next month due to a drop in fixed mortgage rates to the current 5.75%.

2) The U.S. Treasury is considering a plan to drive mortgage rates down to as low as 4.5%. They would accomplish this by purchasing mortgage-backed securities from Fannie Mae and Freddie Mac.

Would low housing prices and a generational low in mortgage rates prove too tempting to home buyers and cause a mini boom in housing and begin to clear inventory?

Disclosure - I am long the XHB and ITB.

3 comments:

Miguel Barbosa said...

Hi,

Interesting Post. While I don't believe in large macro calls. I have added this link to my nightly value investment links at Simoleonsense.com I think my readers need to hear your opinions. Keep up the great work

Best regards
Miguel barbosa
www.simoleonsense.com

Eric J. Fox said...

Thanks Miguel

Anonymous said...

I dont think so, even if the rates drop down into the 4's, the banks have tightened the qualifications so most folks who were getting mortgages probably now wouldnt qualify. also they are advertising one value- say 80% LTV and using another value say 60% ltv so alot of the houses wont appraise for a refinance.