The federal takeover of Fannie Mae and Freddie Mac has been all over the news. Unless you have been on vacation for the past week, I’m sure you at least read some blurb about this.
What does that mean for us here in Salem Oregon?
We are just one of the many that will be footing the bill. It doesn’t matter what you call the bailout, the American taxpayer is the bottom line. Where is the money going to come from?? Who knows at this point? With it being an election year, the mention of a tax hike to finance this would be a sure fire way to lose the election.
One of the big concerns for the housing market will be the reduced role that Fannie and Freddie will play starting in 2010. In 2010, the mortgage portfolios will be reduced at a rate of 10% per year until they are at a size of around 250 billion. This doesn’t seem like a big deal until you look at the fact that they are at 5.4 trillion right now, and their market share reached 80% earlier this year.
What the secondary mortgage market does is purchase loans. Since banks are required to have a certain ratio of loans to cash, once they loan out a certain amount of money, they have to stop. With entities like Fannie and Freddie, they buy these loans which allows new loans to be created. So starting in 2010, the largest purchasers of loans will be decreasing their loan portfolio by 10% a year.
Now temporarily, interest rates should stay low, so that is good news for buyers that are looking to purchase in the near future.
If you are going to be selling real estate anytime in the next few years, be prepared for a bumpy ride. With limited access to credit, and it appears that in 2010 it will be worse, our local housing prices may continue on their mild decline, or at best plateau.
(c) Copyright, 2008. Melina Tomson, All Rights Reserved (ie…be nice and create your own content. Don’t steal mine…)