ARE YOU THINKING OF BUYING OR SELLING?
What Are You Waiting For? Tomorrow May Be Too Late!!
The Obama administration and the Republicans are proposing Mortgage Reform. This reform would eliminate Fannie Mae & Freddie Mac, the two government sponsored enterprises that control half of the nation’s $11 billion mortgage market. Over the past 2 years the government has been involved in over 90% of all mortgages. The plan calls for the implementation of a system that would use private backed capital instead of Taxpayer’s money. The plan is to be implemented over the next 5 years and we are already seeing changes.
So how will this potentially affect you as a Buyer or Seller?
• MORTGAGE RATES: There will most likely be a limited supply of money in a Private Backed Mortgage System. Limited supply of money leads to higher rates. We are already seeing banks raise the FICO scores necessary to get the best interest rates, technically raising Mortgage rates. Higher rates reduce buying power and in turn reduce the number of Home Buyers.
• FIRST TIME HOME BUYERS: Since Freddie & Fannie have programs to help the 1st time home buyer, their elimination would make it more difficult for these individuals to enter the Real Estate Market. It is also expected that Lenders will require more money down, 10%-20% vs. 0%-3.5%.
• TRICKLE EFFECT: Fewer 1st time home buyers make it harder for present home owners to make the move up to a larger home for their growing family. Fewer Move-Up Home Buyers make it harder for Empty Nesters to sell their larger homes allowing them to downsize into their retirement home.
• HOME PRICES: Fewer Home Buyers, in all facets of the Real Estate Market, as well as Higher Interest Rates will cause Home Prices to fall. Following the Economic Basics of Supply & Demand we could have a double whammy. Less Demand & an Increase in Supply equals LOWER PRICES! In addition it is expected that there will be 1.5 million foreclosures in 2011 and that’s not including the large number of anticipated Short Sales.
