Wells Fargo gives bank stocks and the real estate market hope
April 10, 2009 by admin
The real estate industry has long been searching for the light at the end of the tunnel. The rapid slide with home prices and record property foreclosures have greatly diminished the largest asset for almost every consumer. The news out of Wells Fargo on Thursday ignited a bank led stock market rally that is building off of the momentum of the March stock market surge. Wells Fargo, one of the nations largest banks, acquired Wachovia Bank in 2008 amid a controversial acquisition and potential Citigroup lawsuit. The move has positioned the bank as one of the top 3 deposit based banks in the country. Wells Fargo’s optimism was fueled by over $100 billion in mortgage loan production for the first three months of the year.
The mortgage industry has benefitted from record low mortgage rates, thanks in part to the moves by the FOMC to guarantee mortgage backed loan securities in December of 2008. This move, followed by an additional committment to buy more mortgage backed bonds in March of this year has helped to drop fixed rate mortage rates to five percent or less for both thirty and fifteen year loan terms. The record low interest rates have led to a surge of refinance loan applications for banks and mortgage companies. The low rates have inspired millions of homeowners to refinance into fixed rate home loans, a great boost to monthly budgets during the economic downturn and a way to help stabalize the real estate market. The low rates have been a great boost to the production and clearly the bottom lines of banks such as Wells Fargo. The Fed should be pleased to know that their low rates are helping to not only stabalize the real estat market, but provide an additional revenue stream for banks that have been battered by the economic downturn.
The real boost to the real estate market could happen during the balance of 2009 as consumers leverage the low interest rates with the new tax rebates and begin to remove the excess housing inventory in the market and stabalize home prices. Wells Fargo’s great news, could be the signal that the long awaited housing bottom is finally here.