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The green leaves may have turned brown and fallen to the ground, but I am reading about all sorts of “green shoots” today that we should all be paying attention to. Just remember, these are like the green shoots of crocus–sometimes they emerge during momentary thaws in the winter, only to retreat again until spring officially arrives.
If you read my blog post about The Future of the Real Estate Market and Why, then you know that there are several factors that are pointing to downturn in the real estate market next year. Two of those factors, unemployment and the effect that has on mortgage payment delinquencies, and the likely increase in mortgage interest rates when the MBS Buyback Program expires, are showing some positive signs today.
The November outlook by the National Association for Business Economics, which is set to be released today, shows that economists expect job loss to bottom out next quarter. With the sub-prime defaults mostly behind us, the next wave of defaults are going to be fueled by two things: unemployment and the resetting of Option ARMS. If unemployment can start to improve, there will fewer delinquencies, leading to fewer foreclosures, leading to less inventory that the ailing real estate market has to absorb. Click here for more details.
Yesterday, James Bullard, a senior US Federal Reserve Official with the St. Louis Federal Reserve, announced that the Fed should continue the MBS Buyback Program rather than have it expire at the end of March. This is significant because it is this Buyback Program that has kept mortgage interest rates at their historically low levels. It is widely felt that the expiration of this program will cause mortage interest rates to increase. This is particularly important because of the timing–one month before the extended tax credit will expire. Click here for more details.
As always, I will keep you posted on the latest developments!
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