We may not be here yet, BUT, we are much closer than you may think. In an effort to stabilize the steep and continued and what seems to be an accelerating decline in real estate prices, the US Treasury announced (yesterday) that is in talks with the now Government run entities Fannie Mae and Freddie Mac to come up with a plan to try and reduce mortgage rates to a goal of 4.5% or better.

The preliminary outline of the plan would focus on the FED buying a large portion or all the ‘bad loans’ that are in the portfolios of Fannie Mae and Freddie Mac. Thus, increasing liquidity for these entities to lend money. The more ‘free-flow’ of money to buyers of real estate. The larger supply of money , will be the nature of free market economics will result in lower interest rates and fees in the mortgage and lending markets.

I should mention, that to some extent, lower interest rates have been effective in stimulate the real estate market. Two days ago, the mortgage industry announced that largest amount of applications for mortgages in more than 3 years as consumers rushed to re-finance homes. I should also mention that the vast majority of mortgage applications where ‘re-finance’, not purchases as homeowners still cannot sell homes.

First of all, this is a tremendous effort by the FED to do everything within its power to stabilize housing. However, will it work??

Yes, I think it will surely help. Home prices are at 4 year lows. Down more than 30% across the country. 22% in the last year alone according to the Case=Shiller Index.  Add onto that ‘fire-sale’ , mortgage rates of 4.5% and (dare I say it??) you have cheap or at least much more affordable housing.

Yes, it will help. A great deal in my opinion. However, I do not think it is enough. The average home buyer is still too afraid of continued recession, stock market woes and unemployment concerns to part with large down payment requirements.

I remain cautiously optimistic …. BUT … I still maintain interest rates are not the issue. Rates are low and have been low for some time. Most mortgages are affect only small dollar amounts. Rarely, enough to make a buying decision or not.

Personal Liquidity is the issue. Down Payments are the issue. They require cash and people do not have any. Or, do not wish to part with it.

When down payment requirements change, so will a recovery in housing.!!

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Copyright © James Wexler *Will 4.5% Interest Rates be enough for the Phoenix AZ real estate market??*

If you are a Phoenix AZ real estate investor or a Scottsdale AZ real estate buyer, lower interest rates and Phoenix AZ real estate prices down more than 30% provide a great opportunity to get thedeal of a lifetime.

Call 480.221.8080 to find out more about Phoenix AZ Short Sales and Scottsdale AZ short  Sales