We are coming into some big changes in the mortgage market that will bring a huge impact for 2009. The Feds are buying $500M in housing loans through the bond market from now through June of 2009.  This translates into lower mortgage rate for borrowers and we are already seeing interest rates around 5%.  Will they head lower?  Probably.

If rates continue down, maybe toward 4.5%, it brings bigger buying power — it gives you the ability to buy more house for the same payment.  Of course this will help more buyers get into the market and put a bottom into the housing slump.

However, the “jumbo” loan limit has moved.  Last year it was temporarily raised to $729k for our area but the jumbo line for 2009 is set at $625k.  This means that buyers with 20% down can get a reasonable rate on a $625k loan and afford a home up to $780k.  I’m saying “reasonable loan” because the interest rate difference between the $417k loan and the $625k loan is minimal, unlike the true jumbo loans over $625k, where you will find that you still need to pay a rate premium — sometimes as much as 1 point.

Where is this taking us?  Well, we should also start getting lots of good news from the Obama Bounce during his first 90 days.  In my opinion, I think we’re going to see a lot of sales activity through the first half of the year assuming no more big bad news, and if you have been thinking about buying a home, don’t wait too long since I believe the best deals are going to come in the next 6 months.

-mark