Freddie Mac's Financial Woes Spell More Trouble For U.S. Housing Market

Washington, D.C. (AHN) - Freddie Mac's fourth consecutive quarterly loss signaled more bad times ahead for the beleaguered U.S. housing sector, according to analysts.

The industry had viewed the second quarter earnings of Freddie Mac and Fannie Mae as indicators of the direction for the housing sector, which was anticipating that the market has already hit bottom and is on its way up.

With Freddie Mac's second quarter net loss of $821 million or $1.63 a share, mortgage rates will likely continue to climb and the federal government forced to rescue the two largest mortgage lenders.

The mortgage lender, in its filing with the Securities and Exchange Commission, raised the possibility that its continued financial woes could result to company funds falling below government-set capital levels.

At a conference call with analysts, Freddie Mac chairman and chief executive Richard Syron said because home prices slumped faster than anticipated for the first six months of 2008, "At this point neither we nor anyone else can predict when the national housing market will stop falling."

Responding to Syron's grim outlook, Sean Egan, managing director of Egan-Jones Rating, told the New York Times, "Investors need to believe good news is around the corner to give a company more money, and Freddie Mac has said there is more bad news to come. We don't think they're going to be able to raise it."

A day after Freddie Mac announced its loss, a significant number of U.S. stocks dipped after the biggest rally in four months. At the New York Stock Exchange, six stocks went down for every five that went up, while Standard and Poor's 500 Index retreated 1.29 points on Wednesday.