One of the most important functions of our Government is to help individuals and corporations when they are in trouble. 
Last Sunday, our Government made a strategic decision to officially bail out Fannie Mae and Freddie Mac. The decision is obviously great news for the two mortgage giants, and homebuyer-hopefuls should be just as excited – you’re going to benefit, too!
Although the bailout is a complicated issue, it is better than the alternative – the failure of two companies that own or guarantee about $5 trillion in home loans!
A complete failure of Fannie Mae and Freddie Mac could have lead to a catastrophic freeze in the mortgage market because of the lack of money to fund new loans.
The bailout is positive news and is exactly what the housing industry needs right now. The CEO’s of Fannie Mae and Freddie Mac are being replaced and the new heads will report to the recently formed Federal Housing Finance Agency – which was created under our friend the Housing and Economic Recovery Act.
There will be an injection of up to $100 billion into each of the two companies which should help lower mortgage rates and add stability to the economy. Lower rates and added stability will entice banks to become more willing to write new purchase-money loans and refinance existing loans.
Since the announcement, we have already seen a dramatic decrease in rates. From September 5 to September 8, Conforming 30-year fixed rates dropped about a half percent!
In my twenty-five years of financial and real estate experience, I cannot remember a time when rates decreased that much in such a short period of time.
Buyers are coming out of the woodwork asking how much more they can afford at these lower rates. With their buying power significantly increased, everyone is excited by the homes that are now in their price range.
San Diego is a particularly fortunate place to be if you want to buy a new home. A recent report by Global Insight, the global leader in economic and financial analysis, showed that San Diego homes are undervalued by more than 17 percent. This is a dramatic drop from 2005; at that time our city was overvalued by more than 39 percent.
The combination of lower rates, increased buying power and a newly affordable inventory of housing makes this a fantastic time to buy a home.
The key will be for the rates to hold at these low levels. Remember, lower mortgage rates alone will not solve the housing predicament.
The highly unregulated, Wild West of loan guidelines we experienced a year or so ago helped get us into a mess and the market is still in a corrective period. Reasonable rates, fair guidelines and a properly valued market are our way out.
It is still hard to tell how all of this will be absorbed in the long run and there is no quick fix to the housing situation, but combined with other recently passed legislation, we are making fantastic progress.
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