Further information is coming out showing that the real estate market is still struggling. The most pertinent example of that can be seen in the government’s own estimates of how much money is going to need to be put into Freddie Mac and Fannie Mae before the end: $171.1 billion: http://www.washingtonpost.com/wp-dyn/content/article/2009/05/11/AR2009051103426.html.

What could still be concerning is that if the downturn is even more extended, it would likely require more money than what the government has so far guessed that it will need for everything to be all right. The other question that will come out when looking at the future is how these two companies will work. Would they be an extension of the federal government since they were seized last year? It is hard to figure out.

It is important to think through that simply because the two companies play such a critical role within the economy. Part of what has spurred the real estate market has been the low rates that had not been seen in such a long time. These rates have started to climb some and it will be interesting to see what the Fed does. This had been a primary goal for them through the year: http://www.minyanville.com/articles/jpm-blk-Fed-fre-fnm-mortgage/index/a/22620. Rates on mortgages will increase as the chance for inflation increases. This continues to play a large role in investors’ expectations because of how money has to be printed simply to meet the growing deficit the government is running. As the stock market has improved, more money has shifted out of bonds and into stocks. This is another reason that you see mortgage rates climbing.

While the government is trying many different tactics, it seems likely that interest rates on mortgages will rise. The Fed has used almost every conceivable tool it has available so it may be hard-pressed to find new ways to bring mortgage rates down again. This may not be a bad thing because low interest rates did have an impact on the last cycle of home appreciation which is still being corrected.