By Peter Ricci
So…what’s next for housing? That’s the question on many real estate professional’s minds, now that the presidential election has finally concluded with the reelection of President Obama.
On election day, we surveyed what was at stake for the housing market based on the policy positions of Obama and Republican nominee Mitt Romney, and now, with Obama’s reelection a done deal, here are the three housing issues to focus on.
Housing in the Post-Election World
1. The Fiscal Cliff – By far the most pressing of the housing-related issues facing the president, the “Fiscal Cliff” is the term that the press has adopted to describe a combined $500 billion in spending cuts and tax increases that will take effect in January, should Congress and the President not agree on a bipartisan, deficit-reducing measure.
We’ve written about the Fiscal Cliff before, and its importance for the housing market cannot be overstated. Housing, as any real estate agent knows, is based on trust – the trust that your agent will find you a desirable home, the trust that a bank will lend you the money to purchase the home, and most of all, the trust that your home will grow in value and become a solid investment. If the Fiscal Cliff takes place, and the economy stalls, that trust, which has been slowly coming back in recent months, could disappear.
2. Record Low Interest Rates – One thing President Obama will not have to worry about, it seems, is interest rates, which are likely to remain at record-low levels for the next couple years. According to The Wall Street Journal, the Federal Reserve has committed to low short-term interest rates until mid-2015, and it will also continue to purchase mortgage and Treasury bonds to keep long-term interest rates low as well. What could change that trajectory is if Obama appoints a different Fed chairman when Ben Bernanke’s term ends in January 2014, but Obama has not indicated who he would appoint.
3. Government-Backed Mortgages – Finally, the government’s role in the home financing industry could be changing in interesting ways. As National Mortgage News wrote, Edward DeMarco’s days as acting director of the FHFA could be numbered, and replacing him would remove the administration’s greatest obstacle to a principal reduction plan for Fannie Mae and Freddie Mac mortgages; also, the Federal Housing Administration (FHA) still has a 20 percent market share, but significant tightening of the FHA’s credit standards are unlikely, given Obama’s reelection.