Mortgage News

It was a rough year for many around the world. The economic crisis which started three years ago as a downturn in an overheated U.S. real estate market has spread world-wide. Many would ask what they have to give thanks for in a year in which so many have lost their jobs and houses. We believe there is a lot to give thanks for. For one, after declaring that the economy could withstand the downturn, the government soon came to realize that we must apply strong medicine. Starting in 2008, we did apply this medicine in a variety of ways from record low interest rates to making sure that the banking system did not collapse. We have not addressed the long-term issue of deficit spending, but most would agree strong measures were warranted.

In every challenge there lies opportunities. For example, the down market has made real estate a bargain and millions are becoming owners for the first time. The recent extension and expansion of the tax credit shows the government will continue to apply strong medicine. Low rates, low prices and a government subsidy point to a bargain that many have not seen for many years. Even the recent lull in housing starts bodes well for the long-term prospects of real estate because analysts agree that the market will not rebound permanently until the excess inventory is off the shelves. As the bad news has brought opportunities, the good news of a rebounding real estate market can also create problems. For one, don't expect record low rates to be with us forever. The Federal Reserve Board has kept short-term rates close to zero and also has brought long-term rates down by purchasing mortgage securities. As the market rebounds, less help will be needed and when the government backs off, the record sale on real estate we have witnessed may be over...q