Earlier this week, we saw some holiday spirit out of Freddie Mac (OTC: FMCC) and Fannie Mae (OTC: FNMA). The two highly scrutinized mortgage dealers announced they would delay foreclosures till after the holidays.
Fannie Mae said that from December 19th to January 2nd, they would halt all foreclosures for single family housing and apartments with up to four units which are currently under financing options from US government. Freddie Mac said they would impose a similar provision on single family housing from December 17th through January 1st. Additionally, the two lenders suspended foreclosures for 90 days in areas that were affected by Sandy.
Management backs up their new temporarily policies by saying the holidays are a time to be with family rather than dealing with the stresses of foreclosures. Although it would be interesting to see how much pressure the US government put on the board of directors to pass this temporary new policy because, remember, the US government had to take control over Fannie Mae and Freddie Mac during the financial crisis.
I think this is the right thing to do from the standpoint of Fannie Mae and Freddie Mac. There is still a lot of uncertainty this month and the months ahead with the fiscal cliff talks not showing much progress. Additionally, the struggling US recovery has made it very difficult for people to find jobs, let alone pay mortgage bills and all the other expenses in life.
With that being said, foreclosures are down 17% from a year ago, which definitely shows that the recovery is in progress. Additionally, we have seen construction spending and construction sentiment rose to yearly highs this year further showing that the market is on its way up and a housing recovery is in full swing.
We are still a few years away from the strength that we once saw in the housing markets back in 2007. The overall recovery is taking its sweet time. Unemployment is recovering but at a very slow pace. Once we see unemployment figures begin to steadily drop and enter more “normal” environment, I believe the housing market will follow. The unemployment figure and the housing market are correlated and do affect each other’s outcomes.
The bottom line here is that Fannie Mae and Freddie Mac are showing some “compassion” but it would be interesting to know how much the US government played in this decision. Furthermore, housing has seen a nice recovery in 2012, but it is far from levels that we once knew only a few years ago. As the overall US economy recovers, watch for the housing markets to continue. Additionally, lower unemployment figures will, over time, push down the number of foreclosures and increase the health of the housing market, as new buyers will come into the market. I am forecasting a strong 2013 for the housing market with the real recovery finally coming to an end in 2014-2015.
