What would happen with your land for sale in Louisiana if the 30 year mortgage disappeared? Well you will get your chance sometime in the next 2 to 7 years as the government shuts down Fannie Mae and Freddie Mac.
How and why is the 30 year mortgage going to disappear and how will that affect my land for sale in Louisiana? On February 11 2011 the Obama administration announced plans to shut down Freddie and Fannie if not by a sooner date. There are three proposals in front of Congress right now in hopes they will have some kind of legislation by 2014. If you sell houses for a living you may not like any of the options on the table, they are certain to slow house sales no matter which one they chose or how they implement the plan they can agree on. One option is the government walks away from the mortgage market except FHA, VHA and a few other programs designed to help low in-come and moderate income homebuyers.
Another option is a kind of downsized protection of the mortgage industry using the FHA and VHA entities. It would also provide backup that would guarantee private mortgages in case or a real estate downturn or recession. The only problem with this is that Washington DC will decide when there is a crisis.
The last option for now is somewhat of a variation of option two that would serve as a back-up for a range of mortgage investments already guaranteed by private insurers. This government guarantee would only happen if the private insurers could not pay.
The first stage of this would begin between now and 2014, the government would gradually reduce its subsidy of the housing market around 14% between now and the end of this year. On top of the reduction in subsidy of the market fees would rise on government guarantee loans and a 10% down payment would be required.
The next stage of this will start around 2013-2014 where the federal government will accelerate the pace of this transition to a mortgage market based on private capital with only as needed government intervention. The final stage would depend on congress and which option it chooses. I can assure you it will be harder to get a mortgage soon and by the end of this decade it will be considerably harder to buy a home. When not if the government gets out of the mortgage market there are a few things that will happen and have to come about, private capital and lots of it will be needed to fund the house buying market making a 30 year mortgage much more expensive if not impossible to get, ever heard of cost prohibitive? You will see much less fixed rates and many more ARM loans and big banks will grab more of the market share and last but not least higher mortgage rates will certainly have a negative impact on home sales and in turn home prices.
You may be asking yourself why should I worry about Fannie Mae and Freddie Mac I am a Louisiana land seller, how could losing the 30 year mortgage hurt me if all my inventory is land for sale in Louisiana? Well let’s address this question. If home sales stay down in Louisiana as well as the rest of the nation it will slow everything from lumber sales to furniture sale and in turn keep the economy slower from here on out.
In my opinion the economy will never fully recover from the last three years and sales of homes, land, autos and other big ticket items will be slower from now on, if you have land for sale in Louisiana and that’s your business learn to live on the new sales volumes and if you are barely making it hold on another couple years and if it does not get better I would find a different career.
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