While the takeover of Fannie Mae and Freddie Mac by the Feds is no surprise there remains a lot of speculation about the effects of the takeover on the housing market. Some foresee this as the worst thing that could possibly happen while others believe it may be a step in the right direction to bring stability back to a credit market that has been floundering for some time.

People often tend to forget that Fannie Mae started life as a government entity(Federal National Mortgage Association) in 1938. It was set up to help the troubled housing markets that were floundering because of a lack of liquidity during the Depression. Hmmm... that has a familiar ring.

In 1968 Fannie Mae became a GSE (government sponsored enterprise) and Ginnie Mae (Government National Mortgage Association) was set up to take its place. In 1970 Freddie Mac(Federal Home Loan Mortgage Corporation) was set up as a GSE to process loans on the secondary market. Freddie and Fannie have worked well over the years because investors knew the government would not let them falter... so this bailout should not come as a surprise.

What it means to the housing and financial market remains to be seen. Personally I agree with Market Watch ... lower interest rates will not bring an end to problems in the housing market... not even in Manhattan Beach or the Beach Cities. Stable rates will keep markets that are in fairly good shape from major issues; but they won't do much to help those in the IE or other parts of the state and the country that continue to be in serious trouble.

The general housing market is not going to change until consumers feel more comfortable about the future of the overall economy and their local real estate market. Historically one of the reasons certain markets, like the Beach Cities, do better in times like these is because consumers tend to believe they retain values over the long run.

I've been getting messages from lenders all day indicating lower interest rates which is good news if you are currently either in escrow/refinancing or contemplating a purchase or refinance sometime in the next few months. I'm seeing about .25% decline and have been told that rates may ultimately drop by about .50% and could remain at lower levels for some time ... we'll see. As noted above lower rates alone are not the complete answer.

* Photo courtesy of Matti Mattila at http://www.flickr.com/