Bartlett & Jackson NH Real Estate Market

On Sunday the Federal Government took over Fannie Mae and Freddie Mac mortgage companies, quasi-government entities that purchase or guarantee most of the home mortgages in the U.S. & got into trouble with subprime lending. This basically, is similar to Chapter 11 bankruptcy reorganization.

Some people are saying this is a good thing. A good thing for the Stock Market, The Banking Industry, and the overall U.S. Economy, maybe. Not such a good thing for the Buyers and Sellers in the real estate market. Don't expect any positive news from this move for at least a year.

The first impact of the take over will likely be a short term drop in interest rates on new mortgages of about a quarter percentage. Not enough to change the current market conditions. Any drop in Federally funded mortgages rates with further weaken competitive mortgages from the private banking sector. Can a strong independent banking industry compete with a government able to borrow at 2.5% interest?

Second and most important to watch is the rules the new government agency will set for accepting new loans. Expect them to be stricter and limit the number of marginal buyers hoping to buy into the cheaper market. These marginal buyers were the ones we needed to reduce record high inventories and stabilize the markets. If qualifying is tightened then a hundred potential buyers for a home will be reduced to fifty.

Third, foreclosures might slow down as the Federal Government will be more willing than the Private for-profit businesses were to write down higher loans to more manageable payments plans. But Warren Buffet, warns that bailing out Fannie & Freddie and the associated bad loans sends a dangerous signal that the Federal Government intends to insure bad business practices instead of prosecuting fraudulent practices.

Fourth the National Economy will take another hit with the addition of over $200 Billion in deficit spending to operate these two companies in the short term.

Finally, the three factors that effect real estate the most are 1. the ability to finance 2. The inventory of homes and 3. the positive or negative stance of the economy. I am afraid this week-ends news will result in it being harder for Buyers to finance deals because of tougher credit score requirements, loan-size-to-home-value ratios and down payment requirements. Which will not reduce inventory or improve the overall economic forecast.