“By placing Fannie and Freddie into a conservatorship, the government is promising investors that the companies’ debt is as safe as the Treasury Department’s.
While not a cure-all, the bailout is still a step in the right direction, industry observers say. It will at least “keep the lanes in the mortgage freeway open,” said Greg McBride, a senior financial analyst at Bankrate.com, possibly putting the market on the road to recovery.
If mortgage rates fall, that will attract more potential buyers into the market, which, in turn, will help to prop up home prices, he said.
He expects mortgage rates on a conventional, 30-year fixed-rate home loan to fall over the next few weeks as the dust settles on the bailout. Rates, which now average 6.35 percent, could fall as much as half a percentage point, he said. But continued investor wariness and a depreciating housing market will keep rates from dropping further.
“We’re not looking at sunshine and daffodils in the housing market anytime soon,” he said.”
This will probably have a bigger impact in the middle part of the country. If you ask me California is still toast.
