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Wall Street And Housing: It's Still About Price And Confidence

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I spent the morning canvassing my real estate agent contacts to see how the Fannie/Freddie takeover and the news over the weekend of two major investment banks ceasing to exist affected potential buyers at open houses.

Reviews were somewhat mixed, but the takeaway is still the same: Mortgage rates are not the driving factor for buyers today; it’s still all about price and confidence.

Jane Fairweather is an agent in Bethesda, MD, where home prices are high compared to the national median, but where they’ve come down about 12% since the lackluster spring season. Jane tells me the “Wall Street debacle just frightens people that much more.” She claims the drop in interest rates from around 6.3 percent to around 5.8 percent on the 30-year-fixed makes no difference at all. “People are worried about their jobs and what’s in the pipeline, how many people are going to be affected,” Fairweather says.

She says there was an uptick in sales in June/July thanks to the steep drop in prices, but now it appears that many are waiting for the election, waiting to see what the new administration would bring. The Fannie/Freddie takeover, Fairweather notes, “is too abstract.” Confidence right now is shot, and unless the price is really really right, buyers with good credit and cash are still hesitant to jump in.

WALL STREET IN CRISIS - A CNBC SPECIAL REPORT
WALL STREET IN CRISIS - A CNBC SPECIAL REPORT

On the other hand, David Fogg, who works the Burbank, San Fernando Valley area, i.e. the heart of the real estate bust in California, tells me he’s been aggressively lowering prices and, “I got flooded with offers on my properties.” Most, he admits, were lowball offers, but, “we did put several sales together as a result,” he adds. His assessment today: “Buyers in general are scared to buy, and every sale is very hard to close.”

The crisis in credit has engendered an even deeper crisis in confidence, despite a pretty good environment for home buying. I saw a guy on our air during a special CNBC report last night who suggested that the government should give speculators incentives to get back into the market. He says without speculators, we’ll never get rid of the glut of inventory plaguing housing. I just wonder what all those speculators would do with all those properties?

Questions? Comments? RealtyCheck@cnbc.com