Housing Finance Reform Critical to Continued Recovery of Housing Market

Recent statistics are indicating that the housing market is currently in what is being termed a ‘micro-bubble’ of increasing home values. The rise in home prices, seen as an indicator of a recovering housing market, appears to be driven by a market which currently has more buyers than homes for sale.

The driving factors for the micro-bubble are the previous slow-down in home construction, and people taking their homes off of the market due to low home prices. As builders try to catch up with demand, many see this as a small window of opportunity for homeowners to put their home on the market if they need to sell.

For new home buyers, housing finance reform appears to be critical to help keep the purchases of homes, new and used, moving forward. Unlike the previous housing bubble, qualifying for home financing is much harder for some buyers.

Last week, nation’s home builders today reportedly called on Congress to move forward on bipartisan housing finance reform to ensure that affordable housing credit is available to potential buyers. The association stressed the importance that the legislation ensure that financing be delivered through a competitive, efficient, sound and stable system that maintains the crucial element of a federal backstop for the mortgage market.

“Multiple stakeholders have now weighed in with their proposed approaches to this important task,” said Rick Judson, Chairman of the National Association of Home Builders (NAHB). “While the details of those approaches may differ, one thing they all have in common is the need to maintain some form of federal support to the conventional mortgage market. That’s the point from which we believe Congress should start as it charts a path for the eventual wind-down of Fannie Mae and Freddie Mac.”

The NAHB would like to see Fannie Mae and Freddie Mac, through a transition over time, replaced by a new securitization system for conventional mortgages backed by private capital and a privately funded federal mortgage-backed securities fund.

“As the housing market recovers and begins to add crucial strength and jobs to the national economy, it is essential that Congress ensure a stable and affordable flow of credit for home mortgages and housing construction,” said Judson. “We encourage lawmakers to pursue the path that NAHB has recommended. Most importantly, a federal backstop should be a fundamental element of bipartisan legislation moving forward.”