The first factor is what happens when the Fed stops buying all of our mortgages in March. The federal government (Fanie Mae, Freddie Mac, Ginnie Mae) have been buying about 76% of all mortgages in the US since the beginning of 2009. When a mortgage is created for your buyer there has to be an investor of some type that buys this paper on the back end and holds it long term, whether it be Fannie Mae, some big REIT or some other stock fund. That's the way the system works. The government has been able to keep mortgage rates low, because they don't have to make as much of a percentage as some other investors would look for. At the end of March the FED will own some 1.25 TRILLION in mortgae backed securities, and they've said that they will put a halt to this at that time. What this means is that there's a potential for interest rates to make a considerable increase at that time.
The second factor is jobs. We have to get some of these people back to work, so they can get back to a normal life and afford to buy a home. Companies are making money again, but most of them want to build a little cushion in their bank accounts before they can start to hire some more employess. That's just business. If our government can continue to stimulate the small and medium sized businesses, so that they can continue to hire new employess, then we'll slowly crawl out of the unemployment mess.
The third factor is reality. We have to accept the fact that some companies aren't going to be around anymore. Homes are not going to be worth what they were over the last 3 years anymore, excluding some shore up areas of course, and the same jobs that people have been holding over the last 3 years or more, are just not going to be paying what they were. It's just a reality check for us that we'll eventually get through. It's teaching a lot of americans to do things the smart way. Live within your means. Stash cash when you can. And look at your long term investing goals.
The market picture overall 12 months from now will look a little better, but you'll still have a ton of people that are trying to adjust. We have to get back to letting the markets correct themselves and live without government intervention and without borrowing so much money, as individuals AND as a government. Once we get back to that point, you'll really see a new NORMAL that's much better than it was before.
Marsha Montoya Mayer- Realtor
Paradise Properties of Florida, Inc.