Mac Stock
Posted on Friday, August 28th, 2009 at 5:45 pmMac Stock
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The consequences of the Fannie Mae, Freddie Mac takeover
This has been a week since the feds came in and took over Freddie Mac and Fannie Mae. While it is obvious to take some time to know the long-term impact would look at some of the immediate reactions to moving.
First Instead we will see the reaction of the media and the general public. One would expect that there is any political fallout from the largest acquisition in the history of government. But because of the election and Hurricane Ike the reactions have been largely quiet. There have of course the expected positive reactions that this was a movement cunning to help the housing market and negative reactions that the government should limit its involvement. But for most of their not been a big reaction one way or another. I have actually seen more stories about the reactions at the inauguration of the presidential candidates than stories simply about the acquisition.
While that the media reaction has been muted reaction in financial markets have not been. It is not surprising that stocks of Fannie Mae and Freddie Mac fell after the announcement. The government said in advance that the shares of Freddie Mac and Fannie Mae would lose most of its value in the event of a takeover of the government. So following the news of taking possession of it immediately lost 80% of its value.
The mortgage markets have reacted very favorably to the news. Whereas that the Fed has reduced the time limits for multiple interest rates this year mortgage interest rates have remained relatively high. The reason for this was that banks were uncertain about the financial stability of Fannie Mae and Freddie Mac, which provides insurance for about half of home loans issued in United States. This risk has been reduced since the takeover of government. Consequently mortgage rates have plummeted in the past week. 30 year mortgages has been reduced from 6.35 to 5.93. This is after the rates have dropped from 6.63-6.35 in part by expectations Freddie Fannie and Mac is going to make more. I have seen some reports that it is lower rates have been in the last four months. I think this understates how low rates have fallen. Besides two brief drops at the beginning of 2008, this is the price have been low since 2005.
The lower interest rates should have a positive effect on the housing market. Lower rates pull down the mortgage a home and tend to have a positive effect on Real Estate values and market activity. In another positive sign although their has been no coverage of the media much of the coverage that has emerged has been more positive. To be honest, I was a little surprised by this. I would have expected the coverage to be a bit more complex. But regardless of the favorable reaction of the media in combination with lower interest rates should help the housing market. AND based on what I have heard of to their individual real estate agents seem to be a pickup in activity. But we will not have any hard data on this for a month or so.
Thus, at least in the short term it appears that the Feds have accomplished their objectives of capacity in the housing market with Fannie Mae and Freddie Mac purchase. We, of course, have to wait the next few years to see if this move turns out to be wise. But for now the Fed finally been able to push down mortgage rates.
About the Author
Ki is a real estate broker working in the Austin real estate market. He maintains a website with a Austin MLS search and a frequently updated Austin real estate blog.
Why the nationalization of Freddie Mac and Fannie Mae to make the stock market to rise?
It is certainly something wrong?
The reason for the increase in the stock market is the fact that only a government could put in that amount of money to stabilize the two institutions and to be able to maintain control over the situation. They, of course, be led by two major shareholders of these banks. Now is a colossal amount of money to spend from one bank to another thus allowing banks to start the granting of home mortgages consolidated and secure buyers to generate the new housing market. cash Static wasted opportunity because it will not generate any business and make more money yet. This is simple, elementary economics. Keep the money moving and winning is like pushing a snowball in the snow, only gets bigger the more you push.
