The swelling tides of higher mortgage interest rates started to recede last week as investors waded back into the waters.
Fannie Mae reported a $2.2 Billion loss for the first quarter, and issued a warning of a "severe weakness" in the housing market. They also predicted a 7-9% nationwide drop in home prices. Fannie CEO Daniel Mudd told investors "right now we are in the belly of the cycle."
Economists for the National Association of Realtors are predicting flat home sale numbers during the next few months with a chance for a pickup over the summer, depending on the availability of affordable home loans.
There is an abundance of economic data on the plate this week as analysts search for signs of how long and how deep this recession will spread.
Are Lenders Keeping Rate Cuts For Themselves?
The Fed has lowered the fed funds rate from 5.25% last September, to 2% last week, yet interest rates are only moderately lower than 9 months ago. How come?
According to a recent Fed survey, "about 70 percent of banks (lenders) - up from 45 percent in the January survey - indicated that they had increased spreads of loan rates over their cost of funds." This means many lenders are trying to refill their coffers after taking recent financial beatings.
To be fair, there are many factors that go into pricing rates, and the Fed funds rate is but one factor.
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Lew Corcoran, ASP®, IAHSP, IAHSP-CB