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Location: In the North Idaho woods, still surrounded by terriers
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What is all of this bail out and stock market extravaganza going to do to the real estate market? I just finished putting almost $5000 into fixing up my place for sale in the next three or four months...did I waste a lot of money?
Location: Mokelumne Hill, CA & El Pescadero, BCS MX.
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Only time will tell. usually in an election period the party in power will attempt to make things rosier economically. I think we're in uncharted territory this time around. If you will all permit me, this seems to be more of the mismanagement of government that has happened over the past 4 years.
Regardless, your investment in your property, provided it was well spent from an enhancement point of view, should be sound no matter where the chips fall over time.
Our house is currently for sale. OUr realtor, broker and a couple of people I know in the financial industry all stated that things will be slow for the next couple of weeks. This was an emotional blow to most folks and it scared the beejeebees out of all of us.
However, conventional wisdom seems to think that the fed bailout will help banks ease their credit lines. I used to work with a fund manager at a large institution in Boston. I called him and he said that that the real estate market (at least in New England) is at bottom now. Foreclosures are slowing way down and prices have stabilized. With the fed bailout, banks will have some breathing room. He expects mortgage money to be easier to obtain in the New Year and buyers will jump off the sidelines (in New England).
Again, that's one opinion. I don't think anyone knows what will happen. But this guy has been a bear on housing for as long as I've known him (seven years), so this is a welcome change in attitude.
1. The Fed and Treasury are trying to maneuver us into a "soft landing" instead of spectacular mushroom cloud crash. So....maybe their buying up all these mortgages will slow the descent in prices.
However....
2. No matter how many mortgages they buy up, people will only pay what they can afford and are comfortable with.
3. Most banks are not going to end up in the morgue, but they will still be in the ICU for quite a while, so I'm betting credit will remain comparatively cautious/tight (where it should've been all along).
4. If Congress does approve this new bailout. Plus whatever the other ones cost. Plus an increase when they need it (you know they will). Plus bailing out the FDIC. There is no avoiding inflation. Maybe MASSIVE inflation.
5. If there is MASSIVE inflation, maybe it makes sense to buy an overpriced house since in 10 years, 500k won't be worth much.
My big question is, how much and for how long can this bailout prop up values that ultimately need to come down (or at least not change till inflation catches up).
If Dodd and Paulson can come to some sort of half-decent compromise, rather than the blank check Paulson wants, then the market may be calmed. We were looking at a true economic panic, last week, and any recurrence of that would simply decimate the entire developed world.
If the final package includes foreclosure protections and workouts, it might help stabilize the markets, but perhaps at the price of higher interest rates, which could have the effect of excluding some buyers! But there's no telling for sure. We have never had a planetary financial meltdown before, nothing on this scale, so all bets are off. Good luck.
One of the after effects for real estate of any bailout plan will probably be a significant decrease in the buyer pool. Lenders will become much more risk averse either through choice or regulation. The number and flexibility of loan products will probably decrease significantly. For a buyer to qualify for a loan they will probably have to be a very low credit risk, which would involve a higher credit score, adequate documented income, and ability to put more money down than has been required in the past.
One of the after effects for real estate of any bailout plan will probably be a significant decrease in the buyer pool. Lenders will become much more risk averse either through choice or regulation. The number and flexibility of loan products will probably decrease significantly. For a buyer to qualify for a loan they will probably have to be a very low credit risk, which would involve a higher credit score, adequate documented income, and ability to put more money down than has been required in the past.
Yes, this is the way I think it will pan out. The only other alternative is to expand government lending programs to an enormous degree, and the taxpayers won't be in the mood for that once they get the bill for the bailout. So prices may continue to fall.
One thing's for sure, the war is over. We won't be able to afford it after this bill comes through. And if the troops are demobbed into a high-unemployment scene, we will have an extremely unhappy population.
If anything they are going to tighten up lending.
The government is taking on a boatload of troubled morgages whose underlying asset has depreciated.
Home prices went up too quick..quicker than salaries. People took on way too much debt (mortgages, CC's helocs) and had no room to absorb rate increases/higher payments.
I don't think the government will let this get back to easy lending standards.
Only time will tell. usually in an election period the party in power will attempt to make things rosier economically. I think we're in uncharted territory this time around. If you will all permit me, this seems to be more of the mismanagement of government that has happened over the past 4 years.
Were you a real estate agent in 2005? If so, were you complaining about how the government wasn't doing enough to slow the housing boom?
Location: Mokelumne Hill, CA & El Pescadero, BCS MX.
6,957 posts, read 22,313,597 times
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Why yes I was an agent in 2005. However, I think that over-leveraged investments were responsible for the 1929 crash of the stock market and our current issues, which is why I pay cash for all my real estate.
I'm willing to bet I could have stood on the steps of the Capital and complained my head off, but it wouldn't have changed a thing. As an agent, I don't make the market, I provide service to those that do.
Back in the early 1980's, I spent some time as a Registered Investment Advisor, just before the October crash of 83, I advised all of my clients to get to cash quickly. Some took my advice, others didn't. I always thought it was much easier to see highs in a liquid market versus an illiquid market like real estate. I didn't see this one coming at all, but it wasn't much of a big deal in my market area then, we've sort of floated down gradually and haven't seen the cliff that some areas have.
Guess I'll have to trade my 1969 crystal ball in for a new one.
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