Fed Gov’t to Stay in Housing…for now

Earlier this year, there was alot of speculation and chatter that the Federal Gov’t (aka Fannie & Freddie) would be exiting the mortgage business.  The idea was that the investors on Wall Street would fill in the void and provide the necessary liquidity.  While I support this idea, the timing could not be worse – after the recent devastation to the mortgage backed securities business, I believe that it will be some time before the savvy investor is willing to get back into the game.

The following is a repost from the Wall Street Journal -

Government may be forced to stay in mortgage businessJune 20, 2011 02:30PM A dicey start to the spring housing season has raised the prospect that the government will remain dominant in the mortgage market for longer than intended, the Wall Street Journal reported. The fragility of the market, falling prices and reduced consumer confidence are making it difficult for Washington to pull back its support.

Government-sponsored organizations Fannie Mae and Freddie Mac must try to return to sound lending standards without cutting off access to mortgages completely, according to the Journal. Taxpayers are on the hook for $138 billion since Washington took over control of the organizations in 2008, a loss that it cannot walk away from. “We’re not going to get a recovery in housing until the average borrower can get a mortgage,” said Kenneth Rosen, a California-based economist. Some experts are championing the return of private investment as a means to curb the government’s role. Obama administration officials are pushing to increase fees to lenders and reduce the maximum loan size eligible for government backing. Those limits are set for a minor decline in September.

There are flaws to this rationale, however. “I’m sort of a champion of private capital, but I’m also not naïve,” said Lewis Ranieri, a pioneer of the home mortgage bond market. “At this point, it really doesn’t work because we don’t have fundamental issues resolved.” [WSJ]

At some point, the smart investors will return and bring liquidity to the market place.  This time, I hope that the investors look to the credible mortgage industry professionals to provide due diligence before they buy another pool of mortgages.  In the last go-around, the investor relied too much on their macro-data and never “cracked the tape” to investigate the loans that they were buying.  Caveat-emptor!!!

Suffolk County 2011 – 1st Qtr Report

Suffolk County showed a positive trend throughout the County; each of the six delineated areas that are the subject of this survey showed year over year price increased.  The median sales price County-wide increased on average 8.79 percent.   However, sales activity was down 35 percent.

In the 1st-qtr-2010, there were 1763 sales with a average median sales price of $338,333 – during the first quarter of 2011, there were 1131 sales with an average median sales price of $366.888.

In looking deeper at the number, the southern side of Brookhaven township posted the greatest gain with a year over year increase of 17.8 percent.  The median sales price in this region jumped from $242,000 to $285,000.

Median Sales Price 1st-QTR 2010 vs. 2011	2010	2011	Change
Huntington	$442,000	$484,825	+9.7%
Babylon and Islip	$270,000	$279,000	+3.3%
Smithtown	$400,000	$400,000	no change
South Brookhaven	$242,000	$285,000	+17.8%
North Brookhaven	$296,000	$320,000	+8.1%
East End (non-luxury market)	$380,000	$432,500	+13.8%

Nassau County 2011 – 1st Qtr Report

Nassau County showed an overall gain when comparing 1st-qtr 2010 versus 1st-qtr 2011.  On average, the median sales price increased 1.93 percent year over year.  Moreover, the luxury market (defined as $1MM+) posted a gain of 6.90 percent year over year.

Sales activity declined with an average of 27% less sales during the 1st-qtr-2011 as compared to the 1st-qtr-2010.   During the 1st quarter of 2010, there were 1542 sales in Nassau County with an average price of $406,200 – compare that to 2011 when there were 1129 sales with an average sales price of $415,200.

LOOKING DEEPER

Of the five (%) defined areas of Nassau County, four showed either a positive gain or no change at all.

The northwestern section of Nassau County (including Great Neck, Glen Cove, etc..) posted the most significant gain of nine (9) percent year/year.  Similarly, the median sales price of luxury homes in this area also saw an increase of 15.4%.

On the other end of the spectrum, the Southeastern section (including Merrick and Massapequa) showed a loss of 5.4 percent year/year.