It’s been quite some time since we’ve posted here and, of course, so much has gone on in the interim that to catch up would be nearly impossible. Suffice to say, there have been some developments in the real estate, residential mortgage and commercial lending arenas, and the news is generally bad. Fed chairman Ben Bernanke is hinting at an additional and more advanced economic stimulus plan and President Bush, at first hesitant to embrace more government intervention, now seems to be coming around to the idea.

Also in the works is another rate cut, with the Fed Funds rate expected to come down to ease lending burdens between banks. This will probably have very little effect on residential mortgage rates, as they appear to be just about as low as they’re going to go for a while. What *may* be easing up in the coming weeks or months, however, is the opportunity to get a residential mortgage without jumping through rings of fire. Well, you’ll probably have to jump through one or two of those, but the marathon-like obstacle course that would-be borrowers were facing a few weeks back may be a thing of the past.

Of particular concern now is the fact that the government borrowing necessary to facilitate the “bailout” plan of Freddie Mac and Fannie Mae is sure to drive up long-term interest rates further (the 30-yr. T-bond, that is) and, of course, residential mortgages are going to follow suit (barring a government program offering under-market residential mortgages, which we don’t forsee). So, while the government wishes to see some upward movement in the housing market that had brought this whole thing crashing down in the first place, the very borrowing that will facilitate the “soft landing” is probably also going to be a catalyst for future woes.

Real estate markets are still relatively strong in some areas, and we’re seeing Baltimore real estate sell at prices only slightly off last year’s mark. What has changed drastically, however, is that inventory, already high going into the “month of doom” that September became, is now piling up even more as would-be homebuyers hesitate to pull the trigger and banks refuse to…well, refuse to do business, it would seem.

Tags: baltimore real estate, economic crisis, government borrowing, t bonds

Posted in Economics, Federal Funds Rate, mortgage rates | 3 Comments »