Where are we headed?

The National Association of Realtors just announced that sales of existing homes in December 2008 jumped by 6.5% nationally from the number of sales a month earlier in November. Now, any real estate broker will tell you that it is not normal to see a jump of any size in home sales in the month of December compared to the month before because we all get busy with holiday shopping, family gatherings, company parties, school programs and any number of other things that distract from the big decision to look for and purchase a home. And from the media reports on holiday retail sales, or lack thereof, one wouldn't have expected higher home sales last month.

More interesting news:
Existing home inventory, homes with "For Sale" signs in the front yard, declined 11.7% in December.
Regionally, in the West which includes Colorado, sales of existing homes for December 2008 jumped 13.6% from November 2008 and they were a whopping 31.6% higher than December 2007!
The median price of a home sold in the West region was 31.5% lower than one year ago in December 2007. But remember, the West region also includes places like Phoenix, Las Vegas and California, where home prices were severely over-inflated.

Late last week the Federal Reserve(the Fed) announced that it had purchased $19 billion(that's with a B) worth of troubled, mortgage backed securities from Fannie Mae, Freddie Mac and Ginnie Mae, the folks who buy mortgages from lenders all across the country. By buying the up delinquent mortgages, the Fed has provided new money for Fannie Mae, Freddie Mac and Ginnie Mae to buy new, good loans from lenders like Well Fargo Home Loans, Countrywide Home Loans and lots of others. And the Fed has $500 billion(with a B) to spend doing this so more mortgage money is available to purchase and refinance homes. Thats why the 30-year fixed rate mortgage is down near 5% now and that's good news for buyers. HOWEVER, this action by the Fed, combined with the Economic Stimulus Package that congress and the new President want, could very well lead to inflation, and home prices always seem to lead the way in inflationary times. So, my prediction is that within the next two years we will see the start of a significant rise in the price of homes and condos again. That's what happens when the government prints too much money!