December brought a late Christmas present to America's homebuyers -- lower mortgage interest rates. Will they continue through January? That's very possible, considering a recent economic event as rare as a solar eclipse.

If you've never heard of a negative yield curve, now's a good time to learn. That's when long-term interest rates fall lower than short-term interest rates. Since banks and securities firms borrow at short-term rates and lend out their money at long-term rates, an inverted yield curve is a good reason to stop lending money.

What many believe is that the negative yield curve signals a slowing economy and less inflation.

The good news for buyers is that if the economy is slowing, fears of inflation will subside. Mortgage interest rates will continue to drift down. The bad news is that nervous lenders might tighten how much they loan out by raising interest rates on higher risk loans.

With home prices still rising, buyers need a break, and they got one with new conforming loan limits. The Department of housing and Urban Development just raised the limit on government-insured mortgages, otherwise known as FHA-insured conforming loans, in 2006 to nearly $363,000. That's nearly one-third more than the average priced home in the U.S., which allows first-time and low-income buyers in high-priced markets a shot at a mortgage without paying higher interest rates for nonconforming jumbo loans.

Freddie Mac also raised its loan limits to $417,000 but that's only for borrowers with the best credit. Feel the squeeze?

In related news, the National Association of Realtors said that existing home sales fell below the record 7 million annual rate for November. Inventories rose to the highest levels in 19 years. Meanwhile, homebuilders are slowing the number of houses they're building to absorb standing inventory.

The NAR's Chief Economist David Lereah says, "We are really on track for a soft landing."

All of this bodes well for buyers and sellers. If low interest rates encourage buyers to continue investing in real estate, sellers will be able to sell their properties, but they'll have to be smart about it.

Buyers will have their pick of properties to choose from and in a buyer's market, they demand homes in premium condition.

Published: January 6, 2006

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Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. For more articles by Blanche, click here.