Chicken Soup for the Housing Market

Nancy Russell Vice President CBRB www.nancyarussell.com e-mail: Nancy.Russell@NEMoves.com The dreaded Common Cold symptoms include, but certainly are not limited to: sore throat, runny nose, nasal congestion, sneezing, coughing, headaches and loss of appetite. And did you ever notice that no matter what you do or what medicines you take, a common cold will be with you for about a week, give or take a day? A doctor might tell you that chicken soup keeps a check on respiratory inflammation caused by the cold. However, it really doesn't matter to me, there's just something good and soothing about sipping a hot cup of soup while you are fighting a viral infection.

Similarly, the dreaded down Housing Market has its list of symptoms. They include but certainly are not limited to: dislocation, fear and anxiety. Despite our best efforts of wishing and willing the Housing Market to turn, it will take its natural course and rebound in time. Like Chicken Soup for a cold here are my "good and soothing" elements for the Housing Market.

President-Elect Obama

After eight years of any administration, I believe there is just tiredness with the old and an optimistic outlook toward the new. When President- Elect Obama is sworn in as the 44th President of the United States, it will be during one of the most turbulent economic times in our history. Regardless of your political leaning, one must be impressed with the economic team assembled to navigate through this troubled period. This economic all-star team includes Warren Buffet, Lawrence Summers, William Donaldson, Eric Schmidt, Jennifer Granholm, Robert Reich, Robert Rubin and Paul Volcker to name a few. It is comforting to know that the best of the best are being put in place to guide the economy to better times.

Federal Reserve

It is no secret: I have been a critic of the people that run our Central Banking System and their decisions. However, I think they got it right when in mid-December they bought $100B in bonds issued by Fannie Mae and Freddie Mac. This will pump up the housing sector. Government backing of Fannie Mae and Freddie Mac is explicit and big. This move has a reassuring effect on investors.

Mortgage Rates

In early December, the Mortgage Bankers Association reported that new Q4 2008 mortgage applications where up 37 percent for conventional loans and up 39 percent using FHA. This can be directly attributed to the current mortgage rates of 5.47 percent for a 30-year fixed rate and 5.13 percent for a 15-year fixed rate. This is as low as it has been in four years! Also, at the current levels, it becomes attractive to those looking to refinance. It provides a promising outlook for those that can borrow "cheap" money.

Reasonable Expectations

A down market is a shock to our system. It does not matter what stage of the game you are in; no one wants to learn that their home value has dropped 25 percent or more since the market turned. Average home prices are now near 2003 and 2004 levels. A year ago potential Sellers were angry after learning their current home market value. During the same time, potential Buyers were concerned that homes they might purchase would see an immediate drop in value. It is uplifting that we Americans have seen the worst and now Buyers and Sellers have reasonable home value expectations.

So in summary where are we today? I truly believe that the housing market is in day five of a very bad cold. We still have some bumps to get over, like widespread increases in unemployment, mortgage delinquencies, high foreclosure rates and rising bankruptcies. However, if one takes a look at the Housing Affordability Measure (low interest rates plus price rollbacks) the Housing Market has not been this affordable to Americans with average income in over a decade. Finally, there is talk that a second stimulus package will include tax credits and even lower interest rates for Buyers. This will undoubtedly fuel an early 2009 recovery.

"Whatever Nancy touches turns to SOLD." Call me at 508-243-8128 or contact me by e-mail at Nancy.Russell@ NEMoves.com. Visit my website at www.nancyarussell. com for more information.