As of the writing of this post the government has recently taken over Fannie Mae & Freddie Mac. Two of the largest backers of mortgages in the United States. So what does this mean for the real estate market?
My oppinion is that it will help out the real estate market based on the following reasons.
1. Interest rates have initially dropped. This should create some stability in the market. The excess supply of homes for sale should decrease in time as demand for homes increases.
2. Prospective buyers will now purchase. Since rates have dropped the cost of home ownership has dropped. Monthly mortgage payments will have dropped and buyers are now able to purchase more. Buyers now are able to purchase more bang for their buck.
3. Cheaper Rates- Homeowners that are feeling the squeeze of an interest rate adjustment from their adjustable rate mortgage (ARM) will now be able to refinance to lower rates.
4. Stabilization of real estate prices. An increased demand for housing should help bring stability to falling real estate prices.
Hopefully, this is the bottom of the market. It is one of the largest macroeconomic events that has happened as of recently that may have an impact on the slumping real estate market. Maybe it is the boost we need. The unfortunate thing is now the American Tax Payer is on the hook for any further market losses as opposed to private money.
What's your oppinion?