Good News for Home Buyers!
It’s not often that governmental action results in tangible savings for the masses. It has been my experience that when our government becomes involved with the handling of money, the end result is worse than before. However with the government takeover of Fannie Mae and Freddie Mac comes an opportunity for buyers to cash in on a bargain. Only last week 30 year loan rates were averaging 6.19%. As of this writing, rates on a 30 year fixed rate had dropped to an average of 5.79%. That’s a huge drop in just one week. Combined with good inventory and lower home sales prices, this is the best news for buyers in many years. The motivating factor of this precipitous drop was the government’s intervention to take over these two “quasi-governmental” agencies. The forming of two separate conservatorships with government backing of $100 billion dollars committed to each will continue to have an impact on the mortgage and housing markets for a long time.
Homeowners will benefit from this governmental intervention. Those with adjustable rate or high interest rate mortgages can refinance at the new lower rates. No one knows how low rates will go, but my guess is that they should continue to drop slightly or hold steady for a while. Since money will be cheaper, sellers will benefit also; since more buyers will qualify for the lower mortgage payments. To me, the government’s “bail out” of Freddie Mac and Fannie Mae is a big win for the real estate industry, although my opinion is in conflict with much of what I read from some of the real estate prognosticators. My guess is that in the next few months we will see a surge in real estate sales in our area. This is the natural course of events when interest rates fall and housing prices are down. Those who are prudent will seize this opportunity that came with the mortgage crisis. My life experience is that with every crises comes opportunity. There will be some who see it as such and act accordingly, and others who just watch, wait, and miss the boat.
Buying real estate, especially for a primary residence, has always been a good investment. Because there have been market fluctuations, buying real property should be looked at as long term. The “flipper” days are done for now, but my bet is that they will return. Rarely has anyone lost money in real estate who invested for the long run. In our area particularly, it would be difficult to lose money on a home purchase. It is true that those who purchased a couple of years ago will find the smallest appreciation, or maybe none, but this will change. Home ownership is still one of the very best investments one can make. Not just for capital gains sake, but many personal reasons. Bottom line on all this is that a door has been opened by the Freddie Mac and Fannie Mae debacle. How long it will stay open is anyone’s guess. What can not be avoided is the fact that now is the best time for anyone who has considered buying a home to make the purchase. Don’t miss the boat!
Written and submitted by Sid Blake, Broker, ERA Pinnacle Properties.