The Good News

According to the Federal Reserve, American homeowners saw their net housing equity-or the values of their property minus mortgage debt-grow from $6.2 trillion to $9.6 trillion from 2000 to 2007.

According to the National Association of Realtors, America is adding close to 1.5 million new households per year which will create an increasing demand for homes.

The Bad News

According to the Office of Thrift Supervision, nearly 2.3 million homes totaling 3 percent of the nation's housing stock, are vacant and on the market.  This represents over a 10-month supply given current sales.  Foreclosures and mortgage payment delinquency rates continue to increase every month, putting downward pressure on the value of our homes.

The Outlook

I believe the new housing bill and other efforts by the government and private industry will help to stabilize the housing market.  I believe the percentage of homes going into foreclosure will level off during the first half of 2009, and then home values will start stabilizing across much of the country.  When that happens many buyers will come into the market and the excess inventory will start to move.

Interest Rates

During the past quarter 30-year, fixed rate mortgages increased about half a percent to 6.25 percent.  Currently 30-year, fixed rate jumbo mortgages are over 7 percent, but there are some great rates on 5/1 jumbo arms, at about 5 ½ percent.  So if you are in the market for a loan of over $417 thousand, one strategy would be to go with a 5/1 arm, and then when the jumbo market returns to it senses, refinance into a fixed rate.