The Next Wave of the Housing Crisis: Much More Pain in 2010, 2011
Today’s Daily Angle comes from Wikinvest Wire member REITWrecks.com. You can read the full article on the REIT Wrecks blog.
The Federal Reserve recently confirmed that it will no longer make open market purchases of mortgage backed securities after March 31st, and underwater homeowners are definitely going to miss that money. This particular Fed program was one of a number of extraordinary, emergency measures meant to reverse the near meltdown of the U.S. financial system, and through it the Fed pumped nearly $1.25 trillion into the mortgage backed securities market over the past twelve months.
The program was officially intended to lower home-loan mortgage rates, and that’s exactly what it did. Brian Sack, head of the NY Fed’s money market desk, estimated that it lowered rates on agency mortgage backed securities by a full point, and that a separate program targeting government securities lowered rates on the 10 year Treasury by at least half a point. Home mortgage rates dutifully followed suit, dropping from almost 6% to below 4.5% today:
When this unprecedented government market manipulation comes to an end, and it is coming to an end now, single family mortgage rates will go right back to where they came from. As that happens home ownership will become even less affordable, and that also means home prices are likely to drop even further.
Click here to continue reading this article on the REIT Wrecks Blog…
