Tuesday, September 16, 2008

There is a Silver Lining After All

Tiiiiiiimberrrrrrrr. Mortgage rates fall off the cliff.

Chart courtesy of bankrate.com

Buried beneath the onslaught of bad news in the financial sector recently is a snippet of good news for buyers of real estate. Regular readers of this blog know that I lean towards the pessimistic and am anything but a cheerleader for the housing market and the economy in general, so, pointing out good news may have you questioning my sobriety. Worry not, I retain my cautious outlook for our market in general and suggest continued patience if you are looking to purchase. My advice remains "don't compromise on the property you're looking for and drive a hard bargain when you do find it". Now on to the good news. An unintended side effect of the bailout of Fannie Mae and Freddie Mac last week was an immediate and dramatic drop in mortgage rates. Even as taxpayers will be shouldering a staggering amount of debt, those buyers taking on new mortgages will be getting rates lower by more than 1/2 of a point than in late August. For a purchaser of a $250,000 Cocoa Beach condo with an 80% - 30 year mortgage that reduction will amount to about $70 per month lower payment or the equivalent of about a $12,000 reduction in price. Not shabby.

With the failure this past weekend of Lehman Brothers, the buyout of Merrill and the future of AIG and Washington Mututal in question, the interest rate trend remains on the downslope with the yield on the 10-year bond hitting a 5 year low this morning, Tuesday Sept. 16. No one knows where this will all end or where rates will be in the near future but, for now, buying power is stronger for those financing their property purchases.

Serendipity is looking in a haystack for a needle and discovering a farmer’s daughter.
- Julius Comroe Jr.

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