Shockwaves from the federal takeover of mortgage giants Fannie Mae and Freddie Mac are still rumbling through the economy as a whole and the housing sector in particular.

But what's the government's move going to mean for the real estate market? Well, it hasn't taken long to get at least a preliminary answer: Mortgage rates dropped by four tenths of a percent almost immediately after the announcement - and there are signs that rates for home buyers could fall even further.

Why? Because uncertainty over the financial stability of both companies had spooked the bond market for months, adding on higher costs for borrowings by Fannie and Freddie -- which got passed on to consumers.

Plus, Fannie and Freddie both had recently doubled their upfront delivery fees for loans -- a half percentage point -- and now those could be lowered or eliminated by the new management. Beyond that, there's a good chance both companies' so-called "G-fees" -- what they charge private lenders to guarantee their mortgage pools -- will also drop, further lowering rates.

In the Mortgage Bankers Association's latest national survey, 30-year fixed rates hovered around 6 percent and were trending lower, while 15 year fixed rate money was at five and three quarters percent.

Even more impressive, applications for new mortgages shot up by 9 and a half percent in the week of the takeover. Applications for home purchase loans to be funded by Fannie or Freddie jumped by 14.4 percent!

So, yes, there's been an immediate and very positive impact for real estate flowing from the resolution of the Fannie/Freddie saga.

Also on the plus side this week, the latest monthly home price survey by Denver-based Integrated Asset Services found a zero point 9 percent (0.9) increase in average prices, although the survey also found prices off by 11.4 percent year over year through July.

The lower mortgage rates came too late to have an impact on the latest pending home sales index from the National Association of Realtors. It took a 3.2 percent drop last month, but there are signs that could turn around.

Realtors chief economist, Lawrence Yun, noted that pending sales were actually UP significantly in a number of hard-hit major markets in California, Florida, and the outer suburbs of Washington DC.

And he said that the relatively recent reappearance of "multiple bids" on properties in those markets are "signaling a bottom" in prices -- the long-awaited flattening out of the cycle that should lead to a slow recovery in the months ahead.

Published: September 16, 2008

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Kenneth R. Harney writes an award-winning, nationally-syndicated column on housing and real estate from Washington, D.C. He is also managing director of the National Real Estate Development Center, a professional education company. He is a past member of the Federal Reserve Board's Consumer Advisory Council, a committee that by federal statute reviews all Fed actions on home mortgage, consumer credit and banking industry regulation. He served as a member of the U.S. Department of Housing and Urban Development's Working Group on Computerized Loan Origination (CLO) systems, and is a member of the Editorial Board of the Fannie Mae Foundation's journal, Housing Policy Debate. He is the author of two books on mortgage finance and real estate.