With few exceptions, news on the housing front has been overwhelmingly positive in recent months. In spite of weak employment trends, historically low mortgage rates and the plodding but inexorable rebalancing of supply and demand have combined to lift sales volumes, prices and perceptions of a housing recovery.
But a rising tide does not relegate housing to a lower rung on the policy ladder. As conditions improve, policymakers will be obliged to address the long-term role of government in promoting specific housing outcomes. Since the government embarked on the conservatorship of Fannie Mae and Freddie Mac more than four years ago, the immediate goal of resuscitating the housing market has taken precedence over the larger question of how policy goals have supported—and undermined—the sustainability of the sector.
the lead indicator
More than three years into the conservatorship of Fannie Mae and Freddie Mac, moribund housing-market conditions remain a drag on households’ wealth trajectories and their confidence in the broader economic recovery. While a robust improvement in national price trends ultimately depends on job creation and endogenous demand for single-family homes, indications of a gradual stabilization of the housing-market trajectory are emerging.
As a function of updated housing-market expectations, as well as “actual results from the first of the projection period that were substantially better than projected,” the Federal Housing Finance Administration (F.H.F.A.) released a report last week updating its projections of potential agency draws from the Treasury under conservatorship. The upside adjustment to the projections should be considered in context, however, given limited transparency of the modeling process supporting the new estimates.