Lynn Sanborn
Windermere Real Estate/SCA, Inc.
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Housing Starts
Posted on March 21, 2009
Housing starts unexpectedly surged in February. Work began on an annual rate of 583,000 homes, a 22% increase from January, posting the biggest jump since 1990. The rebound suggests builders cut production too deeply as the credit crunch intensified at the end of 2008, and they may have to make up for some lost time.
Of course, any sustained recovery in the homebuilding market will be contingent on a recovery in the financial markets. The good news here is that a recovery in the financial markets appears to be under way. Stocks continued to rally last week, though not as much as credit markets. Indeed, 30-year fixed-rate home loans slid by as much as 3/8 of a percentage point to around 5%, nearing record lows. Until recently, 30-year fixed-rate mortgages hadn't been below 5% since the 1950s.
The latest rally in mortgage rates was spurred by the Federal Reserve's ongoing efforts to stimulate borrowing. In its latest go-around, the Fed said it would add $750 billion to the till to raise its total purchases of Fannie Mae, Freddie Mac, and Ginnie Mae mortgage bonds to $1.25 trillion by year's end. The Fed also said it will double its potential note purchases from Fannie, Freddie, and the Federal Home Loan Bank System to $200 billion and absorb as much as $300 billion in Treasury securities, which will add at least as much liquidity to the economy.
