Another trouble is coming up in the market. Freddie Mac has recently reported its third quarter loss, which has resulted to its requesting $ 100 million from the Treasury for it to be able to retain a good net worth.
But what caused these negative figures in the market? According to chief executive Charles E. Haldeman Jr, the housing market is still at a fragile state as the year ends, as it has just gotten new pressure from factors, such as a slow growth in the economy, weak employment and uncertainties in foreclosures. He further adds that it may take a long time before the housing market is able to fully recover.
A lot of the delays and the expenses in the portfolio of Freddie Mac are in the form of repossessed and foreclosed properties that are being sold.
But Freddie Mac is not the only institution, which is currently suffering from the decline in the market. The Federal Reserve, in an attempt to aid the stimulation of the economy, will start purchasing Treasury Bonds. However, some economists worry that this will not be able to jumpstart the growth that the Fed is expecting, but will instead trigger inflation.
The New York Times report that the Fed will once again start to buy bonds, just like it did last year, to be able to lessen long-term interest rates, such as those on mortgages. Low rates are supposed to lead to an increased rate in both spending and borrowing by businesses and households. The report goes on to say that the risks are of course still present, and the policy may trigger inflation to increase. Once this happens, prices will increase as well. If investors presume that the dollar’s value will decrease tomorrow, then they may not want to lend out money anymore at lower interest rates. This turns around the whole process and fails to serve the purpose of buying treasury bonds.
Time will determine if this move will be able to boost to the market and to the economy in general.
In the meantime, consumers remain cautious, especially on house remodeling. The Chair of the National Association of Home Builders Donna Shirley says that homeowners may be interested at remodeling, but the risks are just too scary.
According to David Crowe, chief economist at the NAHB, the remodeling market was able to hit the same stall that the housing market and the economy experienced at the middle of the year. This then has caused remodeling to stay weak, since customers are too scared to invest their money on their home, until such a time when they feel confident on the economy, as a whole. He further adds that the economy is in fact growing, but the rate is too slow for it to be able to aid unemployment and increase the confidence of consumers. In the meantime, remodelers are focusing on granting consumers’ requests for small home improvements till the economy gets more strength.
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