Monday, August 8, 2011

WSJ: S&P downgrade could discourage home buyers

Do the recent downgrades of Treasuries and the fall in the stock market discourage home buyers? The Wall Street Journal seems to think so:
When all is said and done, borrower psychology—and not mortgage rates—could face the bulk of any housing-market damage that stems from the Standard & Poor’s rating downgrades.

S&P downgraded the credit ratings of Fannie Mae and Freddie Mac on Monday morning to AA+ from AAA. That, of course, followed Friday’s rating cut for the United States. ...

At this point, it seems the downgrades are likely doing far more damage to consumer psychology than to mortgage rates, which have fallen to around 4.37% for a 30-year fixed rate loan, near historic lows.

The rout in the stock market, new worries about layoffs, and the euro-zone crisis will not help consumer confidence. “Who wants to get out of bed today, let alone buy a house?” says Lou Barnes, a mortgage banker in Boulder, Colo.

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