We studied the macroeconomic factors effecting the US in first two parts of the Quarterly Economic Report. This week, we will look into the future and give an outlook on the real estate and mortgage markets of 2009. Last, we are going to propose some opportunities that every investor should recognize in this stage of the surprisingly predictable real estate cycle.
Mortgage Markets and Credit
At the end 2008, probably the biggest news is the determination of the Treasury and the Fed to try to push mortgage rate lower. Six hundred billion dollars of Fannie and Freddie mortgage-backed securities and unsecured debt are to be purchased by the Fed according to their November 25th announcement.
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.
Investors have always had the role of stabilizing property values after every bust and this cycle is no different. When investors and retail buyers begin to buy up property, values will start to recover which helps the banks' balance sheets. The good news for loan officers is that the cycle so far has been pretty predictable and we have long been anticipating a new refinance boom that usually comes after federal manipulation.
The Real Estate Markets
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.
Layoffs will be the biggest indicator for Houston for next year. If there are massive job losses then the already fragile market could see a big setback.
Opportunities
Fear in markets leads to an over-correction and there may never be a better time to buy property in Houston - if you have good credit. In otherwise stable markets like Houston, fear is causing prices to move below what Houston's economic indicators should 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
At the end 2008, probably the biggest news is the determination of the Treasury and the Fed to try to push mortgage rate lower. Six hundred billion dollars of Fannie and Freddie mortgage-backed securities and unsecured debt are to be purchased by the Fed according to their November 25th announcement.
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.
Investors have always had the role of stabilizing property values after every bust and this cycle is no different. When investors and retail buyers begin to buy up property, values will start to recover which helps the banks' balance sheets. The good news for loan officers is that the cycle so far has been pretty predictable and we have long been anticipating a new refinance boom that usually comes after federal manipulation.
The Real Estate Markets
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.
Layoffs will be the biggest indicator for Houston for next year. If there are massive job losses then the already fragile market could see a big setback.
Opportunities
Fear in markets leads to an over-correction and there may never be a better time to buy property in Houston - if you have good credit. In otherwise stable markets like Houston, fear is causing prices to move below what Houston's economic indicators should 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 coaches clients through the process of restoring credit and creates a business development strategy to help them overcome obstacles to financing properties and growing their portfolio.
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