Change Coming to Real Estate Markets?

From RealityTimes.com - "Real Estate Outlook: Change Anticipated":

The national economic headlines continue to be bearish, but some of the underlying fundamentals for real estate are pointing to better days ahead.

Mortgage rates remain unbelievably low:

Take home mortgage rates: Last week thirty year fixed rates dropped below the seemingly-unbreakable five percent barrier for the first time on record, according to the Mortgage Bankers Association.

New thirty year loans went for an average 4.89 percent, while fifteen year loans were just above 4.6 percent.

Programs coming which will potentially put an end to foreclosures?

In a letter to Congress last week, Lawrence Summers, Obama's nominee to head the National Economic Council, said the incoming administration plans to use portions of the remaining $350 billion in "TARP" -- or "Troubled Asset Relief Program" -- money to rework monthly payments for what Summers called "responsible home owners" now facing economic challenges in the recession.

Though Summers did not go into detail, the program is likely to be based on FDIC chairman Sheila Bair's proposed "mass-modification" concept that the Bush administration rejected last Fall.

Versions of that program might include widespread principal write-downs -- outright reductions in home owners' mortgage balances -- and guarantees to lenders in the event borrowers re-default.

The Obama administration is also likely to institute an immediate ban on all foreclosure actions, possibly for three months, and is certain to enact bankruptcy reform legislation allowing judges to modify mortgage terms to forestall foreclosures.

Harney's final assertion is that an improved tax credit may be the final nail in the coffin to make all of our housing woes go away:

Add in still another factor: Congress may create a new and improved tax credit -- one that's not repayable and covers all home purchases, not simply first-time buyers -- and we just might be looking at a FAR more positive outlook than a lot of people could imagine.

It's hard to argue that some housing markets are now starting to benefit from the severe price declines seen over the past few years with increased sales activity. The end result is that housing fundamentals and affordability have, in many markets, become much more realistic thanks to the drastic drop in home values coupled with historically low mortgage rates (for those who can qualify).