Thursday, May 6, 2010

"Why Freddie Mac Sees Home Prices Falling Later This Year"

From the Wall Street Journal's Developments blog:

Freddie Mac warned in financial filings Wednesday about four big risks it sees for home prices over the coming year. The company says to expect a further decline in home prices nationally before any sustained turnaround begins.

The chance of further home-price slippage, according to Freddie, stems from the following:

  • our expectation for a significant increase in distressed sales, which include pre-foreclosure sales, foreclosure transfers and sales by financial institutions of their [bank-owned] properties, due in part to [the Obama administration's foreclosure alternatives program]. This reflects, in part, the substantial backlog of delinquent loans lenders developed over recent periods, due to various foreclosure suspensions and the implementation of HAMP. We expect many of these loans will transition to REO and be sold in 2010. This may cause prices to decline further as the market absorbs the additional supply of homes for sale.
  • the April 2010 expiration of the federal homebuyer tax credit.
  • our expectation that mortgage rates may increase in 2010, which will make it less affordable to buy a home....MORE