By far the biggest story this year regarding real estate is the potential implosion of Freddie Mac and Fannie Mae and/or the potential government takeover of these two companies.
It is the biggest story because if something bad happens to either or both of these Government Sponsored Enterprises the impact on real estate would be devastating. These two GSEs provide so much liquidity and foundation to the nations mortgage industry that lending would come to a virtual stop if they could no longer provide that liquidity. And without liquidity the price of loans would rise dramatically and return to rates seen many, many years ago. 10% and 12% 30 year-fixed mortgage would be the average.
And with higher interest rates comes lower demand. And with lower demand comes lower prices,etc. etc. You get the picture and it is not pretty.
Both Freddie and Fannie need to survive in order for the real estate market to keep from getting even worse in the next year or so.
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