“I have some positive housing market news to pass on to you today. Mortgage rates are still in the mid 4’s and holding steady! The Fed has made it clear that they believe housing is the key to recovery and that they will “pull out all the stops” to jump-start activity. They have already announced that they will buy $500 Billion in mortgage-backed securities by June. This is the main reason rates have fallen so much.

Low rates along with falling prices have made real estate more affordable and have generated a renewed interest in home buying. This has not translated into a lot of new sales yet, but a lot more people are getting out there and kicking the tires. Check out this report. In December, the widely-watched University of Michigan national consumer sentiment survey reflected an improvement in potential home buying attitudes, with 72% of respondents indicating it was a “good time to buy a house.” This survey was a key leading indicator of the turnaround in housing activity following the housing downturns in 1982, 1990, 1995 and 2001. This is good news.

Real estate is certainly not “fixed” yet, but the early signs of healing are welcome news. And that welcome news is translating into gains for housing-related stocks, including both home builders and housing-focused retailers. Both are rebounding and have helped to lead the market rally of the past month. Check this out. The S&P 500 Home builders Index is up 70% since the low on November 20, 2008 and the S&P 500 Home Improvement Retailers Index is up 32%. Investors are starting to see the potential of things turning around in housing! The downturn in housing was the key catalyst to the recession and bear market. Early signs of healing in housing are a key sign that the pressure on the economy and markets may begin to abate and we can look forward to a turnaround in housing in 2009.

 Courtesy – James Williamson of Fairfield Mortgage