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Home Builders Stall, but a Easier Credit Could be on the Way

David Becker
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www.iforex.com

Sovereign US Interest rates remain at their 2014 lows, with the 10-year yield printing a reading near 2.60, well below the 3% threshold that many expected to act as a magnate during 2014. A weaker than expected growth and a frigid winter led to a dip in the economic cycle which in turn has kept rates near their trough.

One of the issues has been the demand for housing which has been a reflecting of the difficulty in getting a mortgage. Granted mortgage application rose by 3.6% in the latest week, but in general homebuyers has found it difficult to qualify for affordable financing.

Obtaining a mortgage may be about to get a lot easier as FHFA chief Mel Watt, in his first public speech since taking over as regulator of Fannie Mae and Freddie Mac in January, says the mortgage giants should focus on making credit more readily available to homeowners. The call is a U-turn from the policy of previous FHFA boss Ed DeMarco. “I don’t think it’s FHFA’s role to contract the footprint of Fannie and Freddie,” Watt proclaimed. Winding down the companies without clear proof that private investors are willing to step back in “would be irresponsible.”

Homebuilders as reflected by the XHB (SPDR S&P Homebuilders Index) ETF has been trading near its 2014 lows and remains range bound despite Tuesday jump. Home builders have declined nearly 10% from their peak in March, as economic data has weakened but credit has not slackened. The new take by the FNMA head could be the spark that could drive homebuilders higher.

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