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top of mind

SUPPLY

$

198

CONFIDENCE

TRANSACTIONS

thousand

PENDING HOME SALES INDEX

PRICE

97.4

Measures housing contract activity. An index of 100 is equal to the level of activity during 2001, the benchmark year.

National median.

Derived from monthly REALTOR® Confidence Index. Results for March are based on 3,833 responses to 6,000 surveys sent to large and small real estate offices. The survey asks practitioners to indicate whether conditions are strong (100 points), moderate (50), or weak (0). Some data may be revised from previous issues. 71

1.99 million

69

EXISTING-HOME SALES INVENTORY Number of existing homes on the market at the end of the month.

Seasonally adjusted annual rate, which is the actual rate of sales for the month, multiplied by 12 and adjusted for seasonal sales differences.

4.6 million

Market Pulse

6-MONTH EXPECTATIONS CURRENT CONDITIONS BUYER TRAFFIC SELLER TRAFFIC

63

42

Spring is in the air and so is increased confidence in housing markets. But REALTORS® say tight inventories and hard-to-get credit remain drags on business. Two factors hurting credit availability are federal mortgage rules (qualified mortgage ability-to-repay rules) that took effect at the beginning of the year and increases in FHA premiums. On the plus side, fewer transactions are hitting snags because of appraisal problems.

The Need for a Federal Backstop The increased capital flow is a result of

ECONOMY

the improving economy, healthier banks, rising property prices, and plentiful cash Lawrence Yun is NAR chief economist.

creates dangerous uncertainty to subject

yields than those offered by government

the housing market to the fast-changing

bonds.

whims of pure private capital. That is why

he private mortgage-backed secu-

T

Given this brightening picture, you

rities market is finally rebounding,

might think a return to pure private cap-

has been a leading advocate for in-

supplying capital to real estate

ital is needed on the residential side, as

creased private capital but with a contin-

transactions after a long hiatus. The

some in Congress call for. But that is the

ued government backstop.

evidence is from the commercial side of

wrong lesson to draw.

the market, which, unlike residential, has

Although we should celebrate the

the National Association of REALTORS®

Americans also get that pure privatebank mortgage lending and excessive

only private capital available to it. The res-

improved availability of private capital, we

risk-taking can lead to a meltdown.

idential side has government-backed loan

need to remember that the commercial

Watching the Federal Deposit Insurance

insurance via the FHA and government-

MBS market had collapsed by nearly 99

Corp. step in after high-flying banks

backed MBS guarantees through Fannie

percent in 2009, the year after the finan-

collapsed during the Great Recession

Mae and Freddie Mac.

cial crisis, from $229 billion to $3 billion

reminds us that the bill still falls on the

and was virtually nonexistent for three

taxpayer when the federal government

market roughly doubled and is projected

consecutive years. Had such a situation

doesn’t guarantee the mortgage loans.

to rise by another 20 to 30 percent this

been the case on the residential side,

year. As a result, transactions are pro-

home sales activity could have similarly

but it’s potentially devastating for home

jected to rise by 10 to 15 percent.

crashed. Pure private capital is fickle.

owners and taxpayers.

In the past year, the commercial MBS

12

Americans wisely understand that it

flowing across the globe seeking juicier

REALTOR® MAY/JUNE 2014

Pure private capital is nice in theory,

REALTORMAG.REALTOR.ORG

RealtorMag May/June  
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