Financial bailout affects local real estate

September 28, 2008 12:00:00 AM PDT
People hoping to refinance or buy a new home are waiting to see what the impact will be on interest rates and whether loans will become more available.

People who are interested in refinancing their homes or buying a new home are waiting to see what the effect of this rescue plan will be on the credit markets.

For example, a San Jose home is selling for close to $1 million. Real estate agent Michael Ortegon says, while these expensive homes are selling, he's optimistic that the new federal rescue plan will also help him sell those more affordable homes if the banks play ball.

"What we really want to see is the credit lenders start loosening up a little bit, giving some packages and programs for that first time home buyer," says Ortegon.

The compromise reached in Washington is good news to some, but a few people who were shopping for homes in San Jose want to see how the plan affects them and the markets before they start to cheer the legislatures work.

"I'm not sure how much faith I put in that just yet. I don't have much trust in everything that's been going on so far," says one buyer.

According to the plan, the government would insure some bad loans rather than buying all of them. The government would also be asked to re-negotiate bad mortgages with the aim of lowering payments so people could keep their homes from foreclosure.

"The government is doing something unusual here. It's acting before the depression hits," says Dean Terry Conelly.

Terry Conelly is the dean of Golden Gate University's School of Business. Having spent 35 years on Wall Street, he agrees with the need for a rescue plan but says people shouldn't think it will change things overnight. There are some things borrowers will need to do first.

"Talk to your mortgage service or talk to your banker because there are going to be a lot of channels open to the government to help you stay in your home."

Connelly says you won't see mortgage rates go down anytime soon. But, banks will have more money to put into the mortgage markets for home buyers over the next few months. He says those loans will be accompanied by strict lending requirements.


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