Tax Credit Extension

Buyers who think the tax credit extension will give them more time to buy should be careful how long they wait...for 2 reasons. 1) Tighter credit standards are coming. Fannie Mae will very soon be reducing their allowable debt-to-income ratios which will therefore reduce the monthly mortgage amount a buyer will qualify for. 2) Mortgage rates are set to climb. The Fed ended their $300 billion Treasury bond purchases on 10/29 and will stop buying mortgage bonds in March. This will create an oversupply of bonds in the market looking for buyers. When there's too much of anything the price typically drops. When bond prices drop, the yield (or rate of return) goes up. The only way to get the $$ to pay higher yields is to charge borrowers higher rates. And none of this takes into account inflation (which bond investors hate). Though inflation remains relatively tame right now, we as a country can't continue spending billions that we don't have (which devalues the dollar) and expect that prices are not going to climb. Do your buyers a favor and tell them they can't afford to wait!