US. housing activity remains weak despite six years of federal government aid, strong interest from overseas buyers, rock-bottom interest rates and massive purchases of mortgage bonds by the Federal Reserve. Does this mean housing may never spring back to its pre-recession levels? Many signs point to yes. Dont blame the Chinese, who are showing an abundance of interest. The value of home sales to all foreigners rose 35 percent last year to $92 billion, up more than 50 percent since 2007 and accounting for 7 percent of all existing home sales. Foreigners view U.S. homes as safe investments and U.S. schools as good places to teach their children English. But such robust foreign purchases cant overcome what ails the U.S. housing market. Activity is weak even now that banks are no longer tightening mortgage-lending standards.With the federal funds rate at essentially zero and the Fed having ended its purchases of mortgage securities, the central bank can’t do much to help housing now. Even with that,Banks are also being careful to avoid the high cost of mortgage defaults now that they must repurchase loans with underwriting defects. As you can see, the federal government is trying mightily to spur housing activity. But don’t expect this small but volatile sector to move the economic needle anytime soon, even as 30-year mortgage rates drop. The headwinds from consumer debt, high down payments, unforgiving credit-score standards and worries about another swoon in home prices are too strong.
Posted on: Sun, 25 Jan 2015 21:24:25 +0000
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