Fannie Mae CEO: Housing Slump Won't Hit Bottom for A Year

http://www.cnbc.com/id/20202424 ^ | 8-9-07

[Hydroshock]

Daniel Mudd, chief executive of mortgage lender Fannie Mae, told CNBC that the housing slump won't hit bottom for another year and that the current credit crunch will spread “all across the housing market.”

In an interview, Mudd said Fannie Mae is seeking regulatory approval to increase its lending limits in order to put more liquidity back in the mortgage market, which has been hurt by growing subprime lending troubles and tightening credit.

“We’re ready to start investing now,” Mudd said. A lot of "people and institutions in the middle of the system" could benefit from the increased liquidity, he added, including subprime borrowers.

Mudd also believes the housing slump is likely to get worse before it gets better. “We don’t see a bottom until the second half of next year,” he said. "The question is what can we do to make that as moderate a downturn as possible, and the answer is to us is liquidity."

[Hydroshock]

I think it will not hit bottom until mid 2009.

[TChris]

I’m glad I pulled out of real estate funds when I did.

[Red in Blue PA]

It ain’t gonna be pretty.....that is certain.

[finnman69]

I had been predicting massive news coverage of foreclosures by the end of the summer early fall.

I was partially right. The subprime meltdown is getting even greater coverage. The nightly foreclosure horror story reports will start in September, peak by Thankgiving.

[dragnet2]

In southern California it hit bottom over 6 months ago. Houses leveled off, and even dropped in some areas. Now, they are actually increasing in value, but at a slower pace, just as the homes are continuing to sell, but at a slower pace.

My hunch...

Watch for interest rates to drop rather dramatically in the near future. Possibly starting next month.

[Hydroshock]

Then watch inflation shoot up.

[dragnet2]

I actually have a bet with my neighbor. He thinks interest rates will stay the same for the next several months...My bet they start dropping, rather substantially starting next month. The loser pays for dinner.

[Hydroshock]

I would nto be surpised by a drop either, but I do think we should not drop them until next year. I am very concerned on inflation. But the Fed has a tiger by the tail and it is getting hungry.