by Jerome a Paris
Sat Apr 5th, 2008 at 02:57:52 PM EST
A few articles on the housing bubble (or the end thereof), as found over the past week.
Data show Fannie and Freddie taking the wheel in home loans
Fannie Mae and Freddie Mac and other government-sponsored mortgage companies have become the backbone of the troubled US mortgage market as purely private sources of finance have all but dried up.
Fannie, Freddie and the Federal Home Loan Banks, a network of bank co-operatives founded during the Great Depression, provided 90 per cent of the financing for new mortgages at the end of 2007, according to the Office of Federal Housing Enterprise Oversight, which regulates Fannie and Freddie.
The increasing role of the government-sponsored enterprises, or GSEs as they are known, reverses years of declining market share. Fannie and Freddie provide financing by buying mortgages and packaging them into securities.
The FHLBs lend money to their member banks against mortgage collateral.
Availability of fresh mortgage funding is seen as crucial to provide support for US house prices, which have fallen sharply from their peak against a record pace of foreclosures and the resulting credit squeeze among private label lenders.
Third of UK housing deals fall through
As many as one in three housing deals are falling through because buyers cannot get the mortgage they need as more lenders retreat from the market.
Buyers are discovering that money is not available in spite of agreeing on a purchase, according to estate agents, or that the bank valuation of their house fails to match the price agreed.
The effect of the lending freeze, and falling house prices, has been severe, with transactions down between 30 and 35 per cent, according to leading sales portal Rightmove.
The number of estate agency office closures has more than doubled to about 10 per cent as a result, according to Ed Williams, managing director of Rightmove.
Deals are becoming difficult to secure, say agents. "The fall-through rate has gone up dramatically in recent weeks to around 35 per cent," said Marc Goldberg, head of residential sales at Hamptons International. Normally the figure would be between 10 and 20 per cent.
Paul Jarman, head of residential agency at Savills, estimated that 20-25 per cent of its sales were falling through, mainly because funding was being withdrawn. Valuers for banks were finding that some houses were worth 10 or 15 per cent less than the agreed price, Mr Jarman said.
Look at property prices, IMF says
Central banks should pay greater attention to housing markets when setting interest rates, the International Monetary Fund said yesterday, becoming the latest body to challenge the once-dominant view that monetary policy should avoid trying to damp booms and busts in property prices.
The comments came in an analytical chapter in the latest World Economic Outlook that suggests that many European countries are vulnerable to a substantial housing market correction.
The IMF estimates that house prices are more than 30 per cent above their fair value in Ireland, almost 30 per cent overvalued in the Netherlands and the United Kingdom, and more than 20 per cent overvalued in France.
And two graphs:
But prices in the posh arrondissements in Paris still went up by 12+% in the past year. Sigh...