Housing Market Uncertainty Lingers in Obama’s Reelection

By Daniel Duffield

In the face of Obama’s reelection, the housing market remains unpredictable as recovery has been fairly sluggish. Over the past three months, home values have risen in a large majority of metropolitan markets; statistics from a survey conducted by the National Association of Realtors (NAR) showed this increase of home values in 120 of 149 cities.

This demonstrates an overwhelming increase from last year’s figures of 39 rising metros. In terms of pricing, median home values have risen 7.6% from last year, illustrating the most significant annual increase since the initial quarter of 2006.

Many attribute this shift to the trend of lessening distressed property sales, with an increasing amount of lenders modifying loans or writing down mortgage principal to avoid borrower default.

Despite this positive movement, tight credit has presented a challenging obstacle for a more healthy housing recovery.  While mortgage rates hover near historic lows and present a tremendous opportunity to qualified buyers, many potential homebuyers cannot secure these rates due to prior credit history and damage done by the mortgage crisis, making home purchase extraordinarily difficult.

Mortgage-dependent buyers have only been “bit-part players” in the scope of the housing recovery movement, wrote Ed Stansfield of Capital Economics.

With these factors in mind, one must consider how Obama’s second term could affect this fragile market.

According to Jaret Seiberg, Senior Policy Analyst for Guggenheim Partners, the president’s reelection will reflect positively for mortgage insurers, while banks and homebuilders may perceive this negatively.

Household construction has made a resurgence, which has been welcomed by the nation’s homebuilders; although the challenge lies with those who must attempt to obtain financing necessary for homebuilding and those potential buyers who may not be able to secure finance loans. This presents the challenge of the “fiscal cliff” and has expressed fears of an echoing recession.

NAHB chairman Barry Rutenberg wrote in a press release on Wednesday that the NAR has urged President Obama and congressional leaders to cooperate and collaborate on resolving the problems presented by the “fiscal cliff” by providing an extension of the 2001 and 2003 tax cuts while keeping a cautious approach to the effects which tax reforms will have on the burgeoning housing recovery.

According to Seiberg, Fannie Mae and Freddie Mac will go largely unaltered over the course of Obama’s second term, as the issue did not carry much weight during the campaign and President Obama never made any promises about actions regarding the future of the mortgage industry.

Rather, a more important concern should be the regulation of the mortgage market under the Dodd-Frank legislation and the potential of the economy falling over the edge of the fiscal cliff. Lenders now face new regulations regarding mortgage underwriting and how much mortgage risk they must maintain. Although the Romney administration could have impeded thise legislation, Obama’s reelection has cemented these new guidelines, and the mortgage industry has responded with caution.

President and CEO of the Mortgage Bankers Association David Stevens stated that the organization will request greater attention to these issues to ensure that these regulations are carefully considered to assess the effects. In addition, the MBA has repeated its appeal to the President to select a federal housing policy coordinator who could enforce a coordinated housing policy in which federal and supervisory organizations are keeping open communication during the drafting of these policies.

For those millions of homeowners who are underwater on their home mortgages, the Obama administration has persistently stated its intention to provide greater accessibility to mortgage refinancing in the hopes of allowing borrowers to capitalize on today’s historically low rates. Since the Democrats represent a majority of the Senate, the likelihood of new legislation on mortgage refinancing seems high, though analysts have endorse the removal of the Fannie Mae and Freddie Mac regulator Edward DeMarco, who has stubbornly impeded the progress of lowering mortgage principal.

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