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Real Estate Recovery around the corner?

AIG bites the dust. Many are wondering "what does this mean to the Real Estate Industry?" As I see it, 30 year mortgage rates were traditionally around 200 - 250 basis points above the yield on the 10 year treasury. If this pattern had followed, mortgage rates would have been below 6% most of this year at the treasury yield sat around 3.80%. However, because of uncertainty (credit crisis), mortgage rates were around 6.5%. Now that the US Government has stepped in to reduce the risks with the bail out of Fannie and Freddie, and other financial companies, I believe that mortgage rates will drop down below 5.75%. This along with the Stimulus Bill that was signed a few months ago should result in more first time buyers coming in to the market. With their actions, hopefully, we will see a carry through to other buyers and sellers to start a recovery. Have a great day!

What do you think?

Posted by Angelo Cusinato |CRMS, CMC|Mortgage Specialist on 09/17/2008 09:25 AM

Comments (8)

Low Rates in the ActiveRain Channel

aig, fannie mae, freddie mac, first time home buyers, lower mortgage rates

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8 Comments on Real Estate Recovery around the corner?

SEP

2008

I think that having low rates doesn't help if the banks have no money to lend.

I agree Lenn. Only those will really good credit and steady income will be able to buy houses. Standards will continue to get tight.

Kind Regards,

Manolis

I am trying to be optimistic! The verdict is still out.

I agree with you that rates may come down, at least for a while. For new buyers, that's great! However, I think a lot of buyers are sitting on the sidelines waiting for a sweeter deal to come forward. Sellers will have to be even more aggressive with better terms and price points until some of the (hopefully) positive effects are perceived. I wonder what plans the bail out referees have planned to move their inventory.

Lenn and Manolis, I do not disagree with your comments that credit standards will continue to be higher than they were in the last couple of years but the bottom line is that there are qualified borrowers out there that might be motivated by lower rates and tax incentives. Returning to bad lending is not the solution. Some people may never be able to manage their credit and will have to rent or live with their parents.

Angelo: Not quite yet. When the buyer returns to the market (I predict sometime next year), we will start to see a correction. until then, there are too many scared and nervous sorts out there not making decisions. It will be interesting to see what happens.

Paul

SEP

2008

Paul, Thanks for your comment. It is obvious from both of our pictures that survivors in the lending business are getting gray hair. It is a shame that there isn't more press showing the advantages to first time homebuyers because of the Stimulus Package. Who knows if these advantages will be increased, or eliminated when they are scheduled to expire.

SEP

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