Economy Watch: Recovering Housing Market Buoys Fannie Mae

By Dees Stribling, Contributing Editor

Fannie Mae reported on Wednesday that it had a net income of about $5.1 billion for the second quarter of 2012. The reasons: credit-related income generated mainly by an improvement in home prices; improved sales prices on the GSE’s REO properties; and a decline in the company’s single-family serious delinquency rate.

According to Fannie Mae, home prices increased by 3.2 percent during the second quarter of 2012, compared with an increased of 1.2 percent in the second quarter of 2011. “We historically see seasonal improvement in home prices in the second quarter; however, the home price increase in the second quarter of 2012 was larger than expected and the largest quarterly increase we have seen in the last few years,” the GSE noted into its SEC 10-Q filing.

Moreover, sales prices on dispositions of Fannie Mae’s REO properties improved in the second quarter of 2012 as a result of strong demand. “We received net proceeds from our REO sales equal to 59 percent of the loans’ unpaid principal balance in the second quarter of 2012, compared with 56 percent in the first quarter of 2012 and 54 percent in the second quarter of 2011,” the company noted on its 10-Q.

Vegas Sees Higher Residential Prices

The Las Vegas metro residential real estate market—worth paying attention to because the market has long been a poster child for the worst of the U.S. housing market—saw its sixth straight month of increasing home prices, a high number of short sales, and housing supply that grew a little during July. According to the Greater Las Vegas Association of Realtors on Wednesday, the total number of local homes, condos and townhouses sold in July was 3,572, which is down from 3,945 in June and down from 4,037 total sales in July 2011.

Reversing a months-long trend, the total number of homes listed for sale on GLVAR’s MLS increased slightly from June to July, with a total of 16,944 single-family homes listed for sale at the end of the month. That’s up 0.1 percent from the number of homes listed for sale at the end of June, but still down a whopping 24.5 percent from a year ago.

Also, about 40 percent of all existing local homes sold during July were short sales, according to GLVAR. That’s up from 34.2 percent in June and the highest short sale percentage GLVAR has ever recorded, pointing the fact that short sales have become a popular strategy for avoiding out-and-out foreclosure in this and many other markets, thus helping support prices, since short sales represent a distressed price, but a foreclosure is an even more distressed price.

Boston Fed head speaks out

Ben Bernanke might have gotten the headlines this week, but the head of the Boston Fed, Eric Rosengren, was actually more outspoken. During an interview on Wednesday, he said—in a remarkably straightforward way—that the central bank needs to stimulate the economy, without regard to presidential or Congressional politics.

In particular, Rosengren thinks the Fed ought to buy more mortgage-backed securities to help drive the cost of mortgages even lower. He said that would encourage the nascent housing recovery, and free up consumer resources by lowering existing mortgage payments.

Wall Street had a mixed day on Wednesday after several days of gains, apparently waiting for word from China and the euro-zone. The Dow Jones Industrial Average gained 7.05 points, or a meager 0.05 percent, while the S&P 500 was up 0.06 percent. The Nasdaq lost 0.15 percent.