Real Estate Market Update

The Federal Reserve announced that it will buy $750 Billion more mortgage bonds last Wednesday. This purchase will bring the total investment to $1.25 Trillion. They are also going to buy $300 Billion in long term treasuries. This will keep the yields of the different types of bonds on an equal playing field. Most are predicting that rates will basically stay in the upper 4's to low to mid 5's for the remainder of the year as a result of these actions.

However, the Congressional Budget Office increased the projected deficit from $1.75 trillion to $2.75 trillion. This creates huge inflationary pressures on our economy. Once things get turned around, inflation will be the headliner, and our good rate environment will vanish. The mortgage market has been up for a week and a half, housing starts were up for the first time in years and consumers have been spending a little more money lately, so the rate of economic decline already seems to be slowing.

The Wall Street Journal reported on a study concerning the relative cost of owning versus renting. The swing is back to historical norms in favor of homeownership in many of our US markets. Over the past 18 years, after-tax mortgage payments have averaged 26% more than rent payments. In 2006 at the height of the housing bubble, mortgage payments reached as high as 66% more than rent payments. By the end of 2008, mortgage payments averaged just 24% more than rent, the narrowest gap since 2001. Qualified renters need to understand that they must buy this year. They'll receive an $8,000 credit from the IRS and they will only need 3.5% down with an FHA loan.

David J Edwards
Real Estate Agent & REALTOR
The David J Edwards Team
Keller Williams Realty Southeast Sound
Phone: 425-890-8045
Fax: 425-902-1899
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The David J Edwards Team specializes in Residential Real Estate for buyers and sellers.