What Mortgage Giants Bailout Means for the San Clemente Real Estate Market
On Sunday, the government announced the bailout Fannie Mae and Freddie Mac due to these mortgage giants having serious liquidity issues. The national housing market was at risk since these two entities back nearly half of all mortgages in the U.S. But what does this mean for San Clemente real estate and the cost of borrowing?
The Good News:
The bailout is crucial to turning the corner on falling prices for San Clemente homes and condos for sale. The availability of mortgage financing and getting approved over the last year has been extremely difficult, meaning fewer individuals were able to buy. With the bailout, there will be a greater availability of credit as the mortgage giants will be able to continue buying mortgages from lenders, which have been traditionally packaged and sold in the secondary markets. Interest rates could drop by 1% as investors in the debt of Fannie Mae and Freddie Mac may require lower returns as the risk of losing their money is now fully protected by the government. This is good news as the higher rates required by investors over the past year have made mortgages more expensive, and therefore, in part explaining why mortgage applications have been down 27% and home prices have fallen.
The Bad News:
With foreclosures and deliquencies at an all-time high, lending standards will remain tight, especially for borrrowers with weaker credit histories. Down payments up to 20% may still remain on San Clemente real estate and lenders are requiring credit scores of 700. Borrowers with scores in the 600s may pay an additional 2.25%. This would mean an extra $1100 per month on $700,000 financed for a San Clemente home or condo. Once the housing markets show more stability (i.e. fewer foreclosures and deliquencies, inventory clearing and prices stabilizing) down payment requirements should begin to ease and lending standards return to historical norms. Nevertheless, San Clemente should begin to see an uptick in sales as their are some great deals to be had, specifically on foreclosures or sellers desperate to move. Buyers with patience will find these deals with the assistance of a specialist.
For more information about San Clemente real estate and what the bailout means, please contact one of our specialized San Clemente real estate agents.
