What Should We Watch For in 2009?
Here's what we know. We know that we will see massive public works expenditures on the part of the federal government in an effort to stimulate the economy. Dilapidated roads will be resurfaced, state bridges will be strengthened and large-scale construction projects will be undertaken in the spirit of FDR. Roosevelt followed the advice of a British economist by the name of John Maynard Keynes who counseled that especially in times of economic crisis, government should create demand by spending aggressively. The idea was supposed to be that during times of prosperity this spending was to be counteracted by fiscal restraint and budget surpluses (American presidents seem to have trouble with this second part).
Although these measures might act as a temporary stimulus to the national economy by creating some new jobs and saving some old jobs, it is not clear what this will do to the housing market. Here's what we need to know in order to understand the state of the real estate market in 2009.
1. Rate of Foreclosures: Nobody really has a clue how 2009 will compare to 2008 in terms of foreclosures because nobody fully understands how much bad debt is out there. Hopefully we will get a better sense of that as the year unfolds and I will be reporting accordingly.
2. Rate of Job Loss: There is one way in which the federal policy may directly affect the housing market and that is job loss. The first wave of foreclosures was caused by the mortgage crisis. Significant additional job loss could create a second wave since people can no longer rely on cash out refinancing to float them until they secure another job.
3. Policy on Loan Modifications: I have heard person after person say "If wallstreet gets a bailout, where's the bailout for Mainstreet." Mainstreet is getting a bailout. It's called loan modifications. The chairman of the FDIC, Sheila Bair, has been determined to get banks to be more aggressive in modifying many of the loans that have resetting mortgage payments in order to keep people in houses. Whether we personally are able to benefit from a loan modification or not, it is in nobody's interest to have banks continue to repossess properties at the rate that they have been over the last two years. Banks have been lukewarm in their response to Bair's exhortations. In fact, the trend recently has been towards a tightening of loan modification underwriting (I will be writing more on this topic in
coming issues).
|
LOL - Laughs OnLine
"Let's hope the investing landscape becomes clearer in 2009"
|
What's The Big Idea? 
As is customary after the 1st of the year, I was asked by one of my employees what I did for New Year's Eve. I told her that I was asleep by 10:30 pm. In a fit of outrage, she accused me of being the most boring person of the modern era. So I need to take this opportunity to vindicate myself. For many years now I have used New Year's Eve as a time to reflect on the accomplishments of the previous year and I have used my birthday which is in July as a midway marker to gauge progress. The thinking is that if I can try to accomplish something significant and meaningful every year I have justified in my own mind being on the planet sucking up oxygen for another year. Now, I fully admit that this is a lot less exciting than oversized balls dropping in major metropolitan areas in front of teeming crowds of intoxicated revelers. But it is a great way to stay motivated to continue to progress as a person. I actually set the alarm clock for 11:30 pm so I would wake up in time for the countdown and I have only the Egyptians and their wonderful cotton to blame for prematurely falling back asleep. What can I say?
|
Share If You Care
Our goal with this newsletter is simple: cover every important topic that might help homeowners and investors make more informed decisions concerning real estate. You can help in two ways:
1) Send us any articles or information you come across that might be of interest to other readers
2) Forward this newsletter to anyone and everyone you know that owns or plans to own real estate!
Sincerely,
Kwame J. Granderson
Equinaire
|
