Home Buddies Quarterly Economic Report - Part 3 - Opportunities
Over the past several weeks we have taken a bird's eye view of the US economy. In this post I will be addressing what we will likely see happening in mortgage and real estate markets in 2009. Finally, I will point out the unique opportunities that are available in this type of environment.
Mortgage Markets and Credit
It seems the biggest story coming out of 2008 is the Fed's announcement in November to buy up $600 billion in unsecured debt and mortgage-backed securities from Fannie and Freddie. The push is an attempt by the Federal Reserve and the Treasury to steer toward lower mortgage rates - not just lower short-term rates.
The sole reason the Fed did this was to lower debt cost (i.e. make it cheaper to obtain a mortgage). They are attempting to kill two birds with one stone by making mortgages cheaper in hopes of enticing potential single family home buyers with credit to come off of the sidelines and purchase.
Furthermore, if home buyers jump into the real estate market, this will further stabilize home values which will help the banks' balance sheets. All of this bodes well for mortgage brokers and loan officers because the ultimate goal of the government is to get mortgage lenders to loosen credit and they have committed to do it. At some point during 2009 mortgage lending should begin to pick up. Expect a refinance boom when the mess clears up.
The Real Estate Market
If housing permits continue to slow, it may be some time before the real estate market improves in the US. Keen an eye on a few things in Houston however. Some cities (including Houston) are still countering the global economic trend. However, even in Houston, permits are starting to slow which may lead to a retraction as we move into next year.
However, layoffs will be the big indicator leading into 2009. If we experience substantial job layoffs then the already fragile housing market could experience a deeper setback.
Opportunities for Investors
With all the "fear" that is surrounding the mortgage and real estate markets, there has never been a better time to buy single family residential homes. Consumer concern over the financial crisis is causing real estate prices in stable markets, such as Houston, to fall under what the market fundamentals in Houston would otherwise warrant.
Lastly, with the current credit standards, many buyers (including many investors) are no longer able to get financing for single family homes. Now there is an opportunity for investors with good credit (or those with other financing options) to buy investment real estate at below-market prices.
Mortgage Markets and Credit
It seems the biggest story coming out of 2008 is the Fed's announcement in November to buy up $600 billion in unsecured debt and mortgage-backed securities from Fannie and Freddie. The push is an attempt by the Federal Reserve and the Treasury to steer toward lower mortgage rates - not just lower short-term rates.
The sole reason the Fed did this was to lower debt cost (i.e. make it cheaper to obtain a mortgage). They are attempting to kill two birds with one stone by making mortgages cheaper in hopes of enticing potential single family home buyers with credit to come off of the sidelines and purchase.
Furthermore, if home buyers jump into the real estate market, this will further stabilize home values which will help the banks' balance sheets. All of this bodes well for mortgage brokers and loan officers because the ultimate goal of the government is to get mortgage lenders to loosen credit and they have committed to do it. At some point during 2009 mortgage lending should begin to pick up. Expect a refinance boom when the mess clears up.
The Real Estate Market
If housing permits continue to slow, it may be some time before the real estate market improves in the US. Keen an eye on a few things in Houston however. Some cities (including Houston) are still countering the global economic trend. However, even in Houston, permits are starting to slow which may lead to a retraction as we move into next year.
However, layoffs will be the big indicator leading into 2009. If we experience substantial job layoffs then the already fragile housing market could experience a deeper setback.
Opportunities for Investors
With all the "fear" that is surrounding the mortgage and real estate markets, there has never been a better time to buy single family residential homes. Consumer concern over the financial crisis is causing real estate prices in stable markets, such as Houston, to fall under what the market fundamentals in Houston would otherwise warrant.
Lastly, with the current credit standards, many buyers (including many investors) are no longer able to get financing for single family homes. Now there is an opportunity for investors with good credit (or those with other financing options) to buy investment real estate at below-market prices.
About the Author:
Home Buddies is a Houston credit repair coach for real estate investors. Home Buddies develops and implements a customized strategy to restore credit and creates a business development strategy to help them overcome obstacles to financing properties and growing their portfolio.
posted by Credit Counseling at
12:10 PM
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