“Although sales of existing homes have been about unchanged this year, sales of new homes have continued to fall, and inventories of unsold new homes remain high. In response, homebuilders continue to scale back the pace of housing starts. Home prices are falling, particularly in regions that experienced the largest price increases earlier this decade. The declines in home prices have contributed to the rising tide of foreclosures; by adding to the stock of vacant homes for sale, these foreclosures have, in turn, intensified the downward pressure on home prices in some areas.”

According to the National Association of Realtors® latest release, existing home sales for May 2008 show modest gains. Single family homes, townhomes, condominiums and co-ops showed an increase of 2 percent month over month. However, foreclosures and short sales are taking their toll as the average home value fell 6.3 percent.

Single family building permits and starts declined in June by 5.3 percent according to the National Association of Homebuilders. The adjusted annual rate of 647,000 units in June is the slowest pace of new single family home starts in 17 years.

2008 has been especially hard for mortgage lenders and banks specializing in sub prime and option arm mortgages. Some of the nation’s top lenders such as Countrywide, Bear Stearns and IndyMac bank have all folded or have been taken over by the government or other banks to help keep the economy afloat. Fannie Mae and Freddie Mac are also under considerable stress due to the conditions of the US economy.

“During the second quarter, credit spreads generally narrowed, liquidity pressures ebbed, and a number of financial institutions raised new capital. However, as events in recent weeks have demonstrated, many financial markets and institutions remain under considerable stress, in part because the outlook for the economy, and thus for credit quality, remains uncertain. In recent days, investors became particularly concerned about the financial condition of the government-sponsored enterprises (GSEs), Fannie Mae and Freddie Mac. In view of this development, and given the importance of these firms to the mortgage market, the Treasury announced a legislative proposal to bolster their capital, access to liquidity, and regulatory oversight. As a supplement to the Treasury's existing authority to lend to the GSEs and as a bridge to the time when the Congress decides how to proceed on these matters, the Board of Governors authorized the Federal Reserve Bank of New York to lend to Fannie Mae and Freddie Mac, should that become necessary.”

Inflation continues to be a huge concern for the Feds who expect inflation to move temporarily higher in the near term. As of late mortgage rates have seen a slight decrease as many investors believe the Feds will leave key interest rates unchanged throughout the remainder of 2008.

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