Home Buddies Quarterly Economic Report

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

Perhaps the greatest news leading into 2009 is the commitment by the Department of the Treasury and the Federal Reserve (“The Fed”) to achieve lower mortgage interest rates. The fed announced on November 25th that it would purchase $600 billion in Fannie Mae and Freddie Mac mortgage-backed securities and unsecured debt.

Whether the government will be able to accomplish it or not, the idea is to lower the cost and improve the investment of financing a property. The goal is to decrease debt costs to put potential investors or retail buyers with good credit back in the market to stabilize the economy.

If investors and retail buyers come back into the market, property values will begin to stabilize thereby improving the balance sheets in the banking industry. This has always been the role of investors in the real estate cycle. This is also a plus for the mortgage loan officers and brokers because the credit markets will ultimately loosen and in 2009 the mortgage market should swing back up. The cycle to this point has been fairly predictable and we have long been predicting the next refinance boom following government intervention.

The Real Estate Market

Here are a few things to look into for Houston. Markets like Houston have been running against the national economic trend, but even in Houston permits are starting to slow. If there is a continued slow-down in housing permits, we may be in it for the long haul.

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

The credit crisis has brought fear into markets whose economic fundamentals would not otherwise justify it. Therefore there may never be a better time to buy single family homes in Houston because the emotional fear does not match the fundamentals and prices have fallen below what they would otherwise warrant without the short-term, emotionally-driven fear.

With credit standards like they are right now, many investors (and most retail buyers) are out of the game because they are not able to get financing for single family homes. So now is a window of opportunity for smart investors with good credit to buy up undervalued investment properies in Houston.

Tagged with: Credit • credit markets • economic reports • Finance • real estate cycles • real estate financing • real estate investing

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