What will that do to the average buyer or seller of real estate? In the past few months, some mortgage rates were dropping, but the rates on FHA loans were not, as Fannie and Freddie could not pass along the better prices to consumers. The conservatorship will probably lower the cost of an FHA loan, so new buyers may get better rates. It will also guarantee that FHA loans will continue to be available. When I watched GMAC financing close its doors to new loans in the Triangle area of North Carolina, I was concerned about the availability of new loans. Now, I am not, as the government will infuse up to $100 billion into Fannie and Freddie to see them through.
One of the biggest problems in the real estate industry is the availability of financing. This move makes financing more certain, and lets Realtors stop worrying about whether they can get FHA loans for their customers. Just the certainty that loans are available is valuable, and the prospect of getting better interest rates is appealing. The loss to the taxpayers is debatable, as we just got preferred shares in companies that will do well in the long run. My hope is that the projections of a $25 billion loss to the taxpayers is highly inflated, and the taxpayers may even make a profit from the preferred shares that pay 10 percent interest.
In general, this is good news for the real estate industry and benefits the stability of real estate.
Eric,
Agreed - I think this was the best option (and only option) that could have been done and the benfits of it will shore up the market - and maybe sooner than later ! The lower rates are a built-in stimulus.