Freddie Mac and Fanny Mae helped consumers get cheap loans for their homes. In the end this system failed and U.S. taxpayers are paying for it. Now the administration wants to decrease government's market involvement. Several options are being discussed (is this coming from a more left leaning administration?). The report "Reforming America's Housing Finance Market - A Report to Congress" has just been released. Whatever the outcome, more free market shall come into play, lenders will do a more thorough risk analysis. Taking risk will cost something once again, at least more than before. The only possible outcome: Interest rates will go up significantly for most home buyers, long term fixed rate mortgages being affected the most. Adding this to the fact of still low 30-year fixed mortgage rates (5%) lets us come to the conclusion, that it might be a good idea NOT to postpone real estate purchases anylonger. - The expectation (!) of increasing interest rates will fuel real estate demand, REO inventory will go down quicker and subsequently home prices will begin to increase again. In other words, waiting for lower property prices could be an expensive strategy, if interest rates go up AND real estate prices will follow.

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Heimo Langenbach, Sea Breeze International Management Corp., www.seabim.com