Five Key Housing issue in 2010

#1  Interest rates.   It is widely expected that long term rates will rise this year.  The real questions are when and by how much.  The Mortgage Bankers Association predicts only a modest rate increase of a .25%-.50% where some predict as much as a 1% increase.  These rates will still be very cheap based on historical standards.

#2 Foreclosures.   Thousands of adjustable rate mortgage are scheduled to reset this year potentially causing further stress on  financially challenged households.   Those with option arms or interest only loans are most at risk.   These borrowers will have limited options as the governments effort to modify mortgages has been largely ineffective.

#3 FHA, Fannie Mae and Freddie Mac.  Nearly 90% of all mortgages are now backed by Fannie Mae, Freddie Mac or FHA,  With the future of these organizations in doubt as they continue to suffer heavy losses, the prospect of further tightening loan standards is a real possibility.

#4  Expiration of the housing tax credits.  Home Sales were fueled in the late summer and early fall in part due to the tax credits and although Congress has extended the credit until the first of half of 2010, some economists believe that the tax credit will steal demand from future months.

#5 Jobs  Although the pace of job losses has subsided we are still not creating new jobs and have a long way to go to replace the 6 Million+ jobs that were lost in the last two years.   Jobs build confidence, confidence leads to spending particularly on housing.

I expect 2010 to be similar to 2009 but with slightly higher rates, a continued steady stream of foreclosures, some minor tightening in lending standards, and hopefully more jobs.

Tony Pigatti

Vice President Residential Lending

Archer Bank

Office #708-237-4049

Cell #630-254-8946

www.metrobankgroup.com

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