How is the real-estate market affected by the recent turn of events?
Posted on January 14th, 2010 in Renting & Real Estate | 4 Comments »
buf asked:
Is this a good / bad time to buy a house? I know the prices are still dropping slowly, but how does the fall of Lehman Brothers, buyout of Merrill Lynch, direction in which AIG is headed affect the real estate market? Will it crash? We are still getting great deals on houses, but is there a possibility that suddenly the housing prices fall by 30% say if another large bank declares bankruptcy?
Huntsville Relocation
Is this a good / bad time to buy a house? I know the prices are still dropping slowly, but how does the fall of Lehman Brothers, buyout of Merrill Lynch, direction in which AIG is headed affect the real estate market? Will it crash? We are still getting great deals on houses, but is there a possibility that suddenly the housing prices fall by 30% say if another large bank declares bankruptcy?
Huntsville Relocation
4 Responses
Boston Real Estate
The answer depends on where you are looking to some degree, but I believe that as a whole there is still a ways to go before we hit bottom. The latest events on Wall Street will make it harder for people to borrow money, which means there will be fewer buyers and those that are left will have less buying power. All of this tends to mean lower prices. At the same time there will continue to be foreclosures that will result in banks having to sell houses quickly. That will also cause prices to drop. The collapse of these financial institutions will also mean that there is less money for businesses to borrow in order to invest in expanding their businsess. That will mean fewer jobs, more unemployment and smaller profits, which again will result in fewer people that can afford to buy houses. The economy and the housing market will eventually rebound, but I think it’s going to be a while.
FSBOS
The banks went down due to their exposure to real estate mortgages, so most are shying away from making more home loans. The market will get worse before it gets better, especially as people lose jobs in the coming recession. Wait till the supply of houses starts going way down before buying, we can expect prices to fall until the supply is gone. This may take years!
FSBOS
NO.
If anything, you will see interest rates come down. I was watching MSNBC this afternoon and someone said that 30 yr rates may go as low as 4.5%. This is amazing. If this happens, there will be many many more buyers. In addition, in some areas, including mine (MD/VA/DC), the supply of homes coming on the market is very low.
What does this mean? More demand (because of lower rates and lower prices) and less supply = increase in prices.
NOW IS THE TIME TO BUY.
You hear figures that don’t tell the whole story. The number of people actually buy is up a lot. People are buy homes at great prices.
I have purchased a lot of investment properties that I couldn’t (or wouldn’t have) touched a couple of years ago. But now they are priced so that I can make the numbers work.
***EDIT*** Bobo is wrong. There has been talk of a recession for 2 years. AND guess what it hasn’t happen.
I don’t like John McCain that much (and don’t plan to vote for him), but he is right when he says the economy has a sound and solid base. Obama can only win if he tells you how bad things are and that he can make your life better if you elect him. This is like looking at the glass as half full or empty.
Brigantine homes
The Fannie Mae and Freddie Mac trouble, the trouble with mutual funds, the trouble with 6 of the nation’s largest asset management firms, the trouble with the dollar and the fact that the cost of oil is going to transfer over $1.3 TRILLION dollars from US to Saudi nations all point to more trouble ahead. In addition, the mortgage fiasco has $1.72 trillion of adjustable mortgages that need to refinance or default before June, 2012. We have only reset $1.4 trillion since August, 2007, so we are not even half way there. Now, add that it takes the banks about 9 months to take title to a foreclosure and realize that there averages about 353,000 filed foreclosures per month for the past 6 months. Soon, banks will be dumping inventory of about 2,000,000 foreclosed properties that they will own on their books as “non-performing assets”.
These truncated little economic tidbits mean that we are only at the beginning. Real estate will continue it’s slide at least through the end of 2012. The 10,202 banks that existed in 2006 is now down to 7,000 and by 2010, will be about 5,000. By 2012, there will be 12 big banks that will control 85% of the banking business and that kind of oligopoly is never good. The Sherman Anti-Trust Act is being totally ignored by Congress to the demise of our individual freedoms.
This is a great time to sell and a great time not to own real estate. Rent something and bide your time for four more years. If you feel that you must buy real estate, buy a 6-unit apartment building because with the tightening of credit, and the numbers of newly created bad credit families, the rents will be going up as fast as the gas prices.