I Believe That if There was Ever a Market Bottom in Real Estate - This is the Mother of All Bottoms...

I think things should pick up for sellers now - due to the govt takeover of Fannie Mae and Freddie Mac on Sunday.

The government just gave potential home buyers and investors a very visible market bottom. (which is going to last for the next month or two at least - as it takes time to absorb inventory)

But if you are a home buyer or investor - and you miss the market bottom - not to worry - there are always very flexible sellers to be found at any time.

Rates just dropped a whopping 3/8 of a percent today to about 5 7/8's. If rates stay low - home prices should not only stabilize - they should start moving up again at some point - as buyers flow into the market.

Are you ready Chicago?

There has never ever in the History of Real Estate in the USA been a better time to buy than right now. You now have an amazing confluence of

low rates and low prices. It doesn't get any better...

Sunday's Government Takeover of Freddie Mac and Fannie Mae

The bottom line? It will likely translate into lower mortgage rates and greater availability of credit. Rates could drop by 1 percentage point from the approximate 6.2 - 6.4% for a 30-year fixed rate mortgage. That would ultimately stablize home prices and perhaps help them go back up again over time.

Fannie Mae stock was down almost 6 points to 1.2 from 7.2 - and Freddy is down 4 from 5.15 to 1.15.

For people who bet on their fall with "put" options - they made a lot of money.

Mortgage rates borrowers pay are dependent on the yields that investors demand when buying mortgage-backed securities from Fannie and Freddie.

Investors' doubts about the companies' viability have sent interest rates on those securities soaring. Despite regulators' July promise that they would step in to save the mortgage companies, investors were demanding rates of 2.25% to 2.45% above Treasuries. . Historically, the spread has been 1.25%.

With the government now taking over the companies and minimizing the risk associated with their debt, investors may be willing to ease off their need for higher rates.

Lenders are demanding credit scores above 700 these days, up from 620 in the past, and downpayments of 20%, up from zero in some cases, experts said.

Just last month, Fannie Mae announced higher surcharges for loans to weaker borrowers. For instance, applicants with credit scores between 640 and 659 who are putting down 15% to 20% will pay an additional 2.25% charge.

The same borrower would pay 1.7 percentage points more because of higher fees and rates for the same loan today as he or she would have paid 18 months ago.

The government bond market is suffering today - as investors reasoned the bailout would vastly increase the amount of debt needed to fund the government's obligations over the medium term. Yields on two-year Treasury notes jumped nearly a half percentage point on the news.

Under the government takeover plan announced Sunday, the Treasury took $1 billion in preferred senior stock in each company, but its equity stake could reach as much as $100 billion in each!!!

Government talk on an aid package ended abruptly in the past few days as policy-makers decided to seize the firms.

What Caused the Implosion of Fannie and Freddie to Get Taken Over By the Government Yesterday?

Fannie Mae and Freddie Mac both issued Bonds which over time mature, and Fannie and Freddie need to pay back the principal on the maturing Bonds.

The way they raise capital to pay these maturing Bonds is to issue new Bonds. This happens every month.

And as long as Fannie and Freddie can sell new Bonds this system works well. But the problems in the mortgage industry reduced investor appetite to purchase these Bonds... Without the ability to sell new Bonds, Fannie and Freddie are less able to meet the capital requirements to pay off the maturing Bonds.

The government's fear was - if Fannie and Freddie were to default and become insolvent, it would throw the beleaguered mortgage and housing markets even deeper into the abyss.

Freddie and Fannie Take Over,Mortgage Rates drop,reduced mortgage rates,refi now,lock you rate now,buy home now,purchase real estate nowThey recently had to make their Bonds more attractive...so they offered their bonds at higher yields to gain more investor interest. However, since they couldn't go back and raise rates on loans that had already been closed, it sucked even more profits out of them reducing their capital even further, and exacerbating the problem.

That's why the Treasury has stepped in and said that they will back the payments on these Bonds. This action has given investors a lot of confidence to step in and now buy Mortgage Bonds.

For a higher rate of return, investors can now buy Mortgage Bonds with the same guarantee as lower yielding Treasury Bonds!

Mortgage rates have reacted this morning with a huge DROP to a national average of 5.93%! We have not seen a mortgage rate drop below a 6% national average since 2005! Many lenders are quoting 5.75% this morning! Couple this with the hundreds of billions capitalization of Fannie and Freddie by the federal government and we may have the start of a housing recovery! So this means:

1. It may be time to refinance now!
2. It is time to buy real estate now! If there was ever a preditable bottom - this is it.
3. It is time to purchase investment and new homes now while prices are still low and sellers are still motivated.
4. If you were borderline on a mortgage approval in the last 6 months, check again! Things are changing daily!

Call our officee today if you are looking for a new home or investment property! We can help! We specialize in representing home buyers in the Chicago area with expert negotiation - so our clients have the best possible price. It's all we do - day in and day out. As a result - we are very very good at what we do.

You can learn more about us on our web site -- www.relocationadvisorsgroup.com or call 847-566-7558.