As the New York Times reported yesterday, the housing market is recovering, consumer confidence is at a five-year high and the market is in the midst of a strong recovery– The housing market is enjoying sustained momentum alongside record highs in the stock market, and is leading the broader recovery. Fannie Mae and Freddie Mac (GSEs) are making money-lots of it. Fannie has paid about $95 billion and Freddie about $37 billion of the approximate $182 billion used to put them in federal conservatorship. The mortgage giants are now on schedule to pay back the taxpayers for the bailout that lead to their conservatorship. Rates are expected to remain relatively low for the next few years and, according to Core Logic, another 1.8 million mortgages are expected to be freed from negative equity with just a 5% increase in prices. According to data from the Case-Schiller index, prices had appreciated 10.2% in March, ahead of analysts’ expectations.
All of these indicators point to emergency measures no longer being required.
The housing market is not the only factor driving this recovery, however. In addition, the closest thing to a silver bullet solution-more jobs- is happening, slowly, but surely. A declining unemployment rate is the essential precondition to any recovery. And that’s been the case from a high of 10.0%, in October 2009 shortly into President Obama’s first year, to a recent low of 7.5%. An expanding workforce means consistent incomes to get mortgages paid on time and save for future down payments. This translates directly to fewer delinquencies, defaults and more first-time homebuyers to keep the housing market churning.
