Housing Affordability

A measure of housing affordability has risen to a record after the Federal Reserve helped drive borrowing costs to all- time lows by holding short-term interest rates near zero. At the same time, home prices have declined 34 percent from the peak in 2006 to the lowest level in almost a decade.

A National Association of Realtors affordability gauge climbed in January to a record 206.1 from 101 in July 2006. A value of 100 means that a family with the national median income has enough to qualify for a median-priced property.

Risks for the fund include volatility if the sovereign-debt crisis worsens as well as illiquidity and uncertainty around future government housing policy, according to the document.

There are also obstacles to a housing recovery, including an "overhang" of homes tied to defaulted loans and owners waiting for better demand that will increase the supply for sale, according to Michael Materasso of Franklin Templeton Investments, which oversees about $325 billion of bonds.

Housing Challenges

Other challenges include the need for an improved job market and for consumers to repair their "balance sheets" and credit scores, he said.

"It isn't going to turn around anytime soon in a major way," Materasso, co-chairman of the fixed-income policy committee at the firm, said yesterday in an interview at Bloomberg News headquarters in New York.

Goldman Sachs, which used bets against mortgage securities to lessen losses during the financial crisis, has drawn scrutiny for its sales of the debt and related derivatives. The firm, the fifth-biggest U.S. bank by assets, denies wrongdoing.

The company paid $550 million in 2010 to settle a fraud lawsuit filed by the Securities and Exchange Commission, which accused it of misleading investors who bought a collateralized debt obligation backed by bets on mortgage bonds in 2007. It was the largest SEC settlement ever paid by a Wall Street firm.

The U.S. Senate's Permanent Subcommittee on Investigations issued a bipartisan report last year that accused Goldman Sachs of misleading investors into buying mortgage securities that the firm's own traders were betting against. The Department of Justice said it would investigate the findings. Last month, the firm disclosed it may face further enforcement actions from the SEC related to sales of mortgage-backed securities.