National Events & How they Affect Durango Real Estate

This past week has certainly seen some upheaval in the financial markets across the country. We've seen stock brokerage houses go belly up, we've seen Fannie Mae and Freddie Mac in effect taken over by the federal government, we've witnessed the stock market go on a complete roller coaster ride. Those events in the national headlines, do have an effect on Durango real estate, so I would like to share my thoughts with you on that.

The Fannie Mae and Freddie Mac takeover, should actually help the housing industry. The people and countries who were buying the Fannie Mae and Freddie Mac securities, were worried about the potential losses that Fannie and Freddie were going to take on bad loans. Consequently, those individuals and countries who were the buyers, we're offering far less money than previously. Let me give you an illustration. Let's say that in 2005 Fannie Mae sold loans with a face value totaling $40 million to the country of China. At that time China might have paid $39 million. Two weeks ago, (prior to the Fannie and Freddie Mac takeover), because of the very real fear of loan losses, that same package of loans with a face value of $40 million, might only sell for $32 million. That very fact, forced Fannie and Freddie, to raise the interest rates on their loans so that the ultimate buyer of those loans was able to make an expected return after factoring in the fact of the large loan losses.

Now with the full faith and backing of the federal government behind these loans, those ultimate buyers don't fear the risk of loss for bad loans and consequently are willing to pay more to buy that $40 million loan package. Because of that, the interest rate charged on the loans that Fannie Mae and Freddie Mac are providing will go down and indeed we already see that this week. With this day like that permanently? That's not likely, but it certainly provides a window of opportunity right now for a well-qualified buyer to get a loan on a property with an especially attractive rate. Combine that with the fact that the inventory right now is higher than we've seen it in years... and you know when there's more supply that means prices come down... this makes it an excellent time to invest in Durango real estate.