Can you believe it, we are already one quarter through what is proving to be a pivotal 2009. The Arizona heat arrived a bit early and so too has an improvement in our local housing market. Suddenly there are multiple offers and people are wishing there was more inventory on the shelf. Wow, what a difference a few weeks can make! This turnaround has been made possible by some strategically positioned Federal support.


The Treasury”™s Mortgage Backed Securities purchase program is one of the pieces of kindling that has lit our market back on fire. The program has the Government contributing $1.25 trillion directly to the purchase of Mortgage Backed Securities. Since the start of this campaign in early 2009 the Fed has spent nearly 1/3 of the promised funds and effectively cut mortgage rates by 1.5% points (from 6.5% to just below 5%). That equates to a $212 monthly savings on a $200,000 mortgage when compared the high rates of October.

The goal was to lower rates to the 5% range, not to drop to 4%. So don”™t expect interest rates to improve significantly beyond this point based solely on help from Washington. As soon as the market turns around the Fed will put their checkbook away! Rates will then be allowed to respond to natural market forces.


Bottom line, the Fed and Treasury will be active in our mortgage market supporting low rates for now but their time and commitment are both measured. The relationship between mortgage rates and government support is similar to when you try to hold a beach ball under water. Once the Fed swims away, interest rates may pop back to the surface without the extra help to stay down.

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