As clocks tick down on 2009, its not hard to foresee big changes in store for home buyers and home sellers in the early months of the new year.
Three huge government supports for housing expire in the next three months. Whether they are continued in some form or replaced by another subsidy is yet to be seen. Whatever transpires, the odds are good that the new year will herald major changes in the housing markets as they adjust to life with less help from Washington.
Here are three dates to enter in boldface on your calendar.
December 31, 2009
Treasury’s Mortgage-backed Securities Purchase Program ends with the new year. By the conclusion of its MBS purchase program, Treasury anticipates that it will have purchased approximately $220 billion of securities across a range of maturities largely through Fannie Mae and Freddie Mac. Its termination will put pressure on mortgage rates. However, Treasury Department left the door open for future support efforts through Fannie and Freddie by lifting the $200 billion caps on the amount of taxpayer money that can be pumped into them over the next three years. Treasury has put $60 billion into Fannie and $51 billion into Freddie since it seized the failing companies in September 2008.
March 31, 2010
The Federal Reserve’s MBS Purchase Program, like the Treasury’s, has helped to keep interest rates low, but the Fed has purchased $1.25 trillion of agency mortgage-backed securities. The Fed is slowing its rate or purchases and will end them with the first quarter. Look for more pressure on mortgage rates
April 30, 2010
By that date buyers must sign a contract to buy a home if they are to qualify for either the first-time buyers’ credit of a maximum of $8,000 or the existing owners’ credit of a maximum of $6500. The program officially ends June 30, giving buyers two months to close. Since no transactions taking place after April 30 will qualify, the credit’s impact on the housing economy will largely end on that date. First-time buyers hurrying to qualify for the credit led to a 7.4 percent increase in sales in November-the highest level since February 2007. What will the end of the credit mean to the market when existing owners are added to the mix and there is an even greater race to meet the deadline?