Interest Rate Roundup

Wednesday, February 27, 2008

New home sales head south again in January

January was another rough month for the new home market. Census Bureau figures (PDF link) show:

* Sales fell 2.8% to a seasonally adjusted annual rate of 588,000 in January from 605,000 in December. From a year earlier, sales were down 33.9%. That leaves them at the lowest since February 1995.

* The supply of homes for sale dipped again to 482,000 in January from 493,000 in December and 536,000 a year earlier. However, on a months supply at current sales pace basis, inventory rose to 9.9 months from 9.5 months in December and 7.2 months in January 2007. That's the most since 1981.

* Median home prices took a large dive -- falling 15.1% to $216,000 last month from $254,4000 in January 2007.

On the other hand, some news just broke that OFHEO will soon lift caps on the growth of the portfolios of Fannie Mae and Freddie Mac. OFHEO is also close to lowering the percentage of excess capital that the GSEs are currently required to hold. Specifically ...

"Since agreements reached in early 2004, OFHEO has had an ongoing requirement on each Enterprise to maintain a capital level at least 30 percent above the statutory minimum capital requirement because of the financial and operational uncertainties associated with their past problems. In retrospect, this OFHEO-directed capital requirement, coupled with their large preferred stock offerings means that they are in a much better capital position to deal with today’s difficult and volatile market conditions and their significant losses.

"As each Enterprise nears the lifting of its Consent Order, OFHEO will discuss with its management the gradual decreasing of the current 30 percent OFHEO-directed capital requirement. The approach and timing of this decrease will also include consideration of the financial condition of the company, its overall risk profile, and current market conditions. It will also include consideration of the importance of the Enterprises remaining soundly capitalized to fulfill their important public purpose and the recent temporary expansion of their mission."


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