Re-Election of Federal Chairman Ben Bernanke

This week the Senate will vote on the re-election of Fed Chairman Ben Bernanke, and will most likely be confirmed to a second term, as the Chairman will need 60 Senate votes to break a procedural delay, and 51 to be confirmed.

More importantly, the Chairman’s reelection is needed to help continue our current mortgage and housing recovery, with two major issues at hand, which will be addressed in this week’s meeting.

The first issue is the Fed's line that has appeared within all Policy Statements during 2009, saying that present economic conditions should "warrant exceptionally low levels of the Federal Funds Rate for an extended period." This has helped to fuel the carry trade, where institutions can buy securities including Mortgage Bonds by borrowing at exceptionally low rates, with little money down to make the purchase, and financing the rest. This allows for enormous gains, but should the Fed signal that they may be thinking about a change to their accommodative policy, this carry trade will begin to unwind and Mortgage Bonds will sell off causing home interest rates to increase.

The second issue deals with the upcoming expiration of the Mortgage Backed Security purchase program. The Fed has been telling us, and signaling to the markets, that this program will end as planned on March 31st. But there has been speculation that the Fed may add to their purchases and extend the deadline. With the expiration close by, the Fed's guidance on this topic will be very important to the direction of Mortgage Bond prices.

A Decade of Dramatic Developments

At the beginning of the 21st century, most home buyers had never viewed a home online; the three top home sale marketing methods were yard signs, newspaper ads, and open houses; and nearly nine out of 10 buyers financed their purchase with a fixed-rate, 30-year mortgage.

What a difference a decade makes

“The real estate industry has seen tremendous change and evolution over the past decade,” said NATIONAL ASSOCIATION OF REALTORS® President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz. “As the first, best source for real estate information, REALTORS® have not only anticipated and adapted to the evolving needs of their clients and customers, but also have influenced industry trends and innovations that will carry us into the future.”

In 1999, buyers who went online in search for a home were in the minority – only 37 percent of buyers used the Internet in their home search, according to data from the NAR Profile of Home Buyers and Sellers. Today, 90 percent of buyers are searching online, and the real estate industry has responded. Sites like REALTOR.com, which attracts nearly 12 million total visits every month, have evolved to gives today’s buyers what they want – not just property listings, but multiple photos, online videos, mapping features, and comprehensive neighborhood information, as well.

Median home values over the past decade have increased more than 25 percent, from $137,600 in November 1999 to $172,600 in November 2009 (the most recent existing-home data available). Fewer people are buying detached, single family homes – 82 percent in 1999 compared to 78 percent in 2009 – but more people are buying homes in suburban neighborhoods – 46 percent in 1999 compared to 54 percent today.

Buyers themselves have also changed. A smaller proportion of married couples are buying homes these days; while married couples comprised 68 percent of all home purchases at the beginning of this century, they represent 60 percent of all buyers today. Single men and women have made up the difference – single men purchased 10 percent of all homes last year, compared to only 7 percent 10 years ago. Single women now represent more than one-fifth of all home buyers – 21 percent, up from 15 percent in 1999.

Other things haven’t changed. The median age for home buyers last year was 39, just as it was in 1999. Neighborhood quality, affordability, and convenience to work and school have consistently been top priorities for both past and present buyers. And eight out of 10 recently surveyed consumers believe that owning a home is an investment in their future.

“REALTORS® have been around for more than 100 years, but one constant during that time has been the persistence of homeownership as the American Dream,” said Golder. “As the first decade of this century comes to a close, NAR stands ready to meet the many challenges and opportunities that lie ahead by helping our REALTORS® members better serve their clients and communities and ensuring that those dreams of homeownership remain possible for all who want to achieve it.”

Source: National Association of Realtors