A big part of my job is helping our clients project the most likely scenarios for the housing market. Now that we know who will be President, my job just got easier because we have four years of experience with Obama and a divided Congress, so we know what we are getting.
However, there is never a dull moment.
Here is what keeps me up at night:
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- Mortgage Rates Dictated by Leadership: Timothy Geithner and Ben Bernanke have worked closely together to implement very accommodative housing policies. Geithner has already announced he is leaving and Bernanke is rumored not to want another term beginning January 2014. Who will be the replacement(s)? Who will slow down the housing market when it heats up again — something I believe Bernanke is trying to engineer as soon as possible?
- Mortgage Rates Dictated by China: While Bernanke has a lot of power, the bond markets are more powerful. International bond buyers, particularly in China, can wreak a lot of havoc on mortgage rates if they don't believe the U.S. will get their fiscal house in order. We need a plan to get our fiscal house back in order, or Reinhart and Rogoff's “bang” moment is going to occur and it will not be pretty. I have faith we will figure it out, perhaps after we create a mini-crisis.
- Mortgage Availability: The tremendous mortgage subsidies that are currently in place, from low rates thanks to the Fed to low down payments thanks to FHA, will continue. If, but more likely when, FHA declares technical insolvency later this month, I believe FHA will continue “business as usual.” I also believe we will eventually see Dodd-Frank rules that are reasonable, with appropriate risk-adjusted capital reserves for the banks, and huge disincentives to create ticking time bomb mortgages. Once we set the rules, the private mortgage market will come back.
- Economic Growth: We know what we're getting here because we are continuing on the same path. I am planning for continued slow growth, with the potential for strong growth if we get our fiscal house in order or we get lucky (shale oil, for example), and the potential for another recession if we don't. Stay tuned.
When we surveyed our clients at our annual conference, 85% said that job growth was the most important factor for a healthy housing market. I just updated our forecasts this weekend, and was pleasantly surprised by how strong the job market has become in so many markets. Over the last year, we have created 66,000 jobs in Los Angeles, 5,000 jobs in Las Vegas, 49,000 jobs in Phoenix, 97,000 jobs in Houston, 12,000 jobs in Tampa and 30,000 jobs in Washington D.C. Perhaps different policies would result in even stronger job growth. That is a lot of housing demand, with very little new supply.
In summary, let's continue doing what it takes to create as many good jobs as possible, keep responsible mortgage liquidity flowing, and get our balance sheet in order. Those are bipartisan goals. If we do that, and I believe we will, housing will have a bright future!
Why would you believe for two seconds that this regime has any inclination whatsover of even trying to put our fiscal house in order? There isn’t one shred of evidence of that. All of the crap that was shoved down our throats in the first term but deferred like everything else they’ve done, until after this past election will will only add further misery. An honest article would have said that.
A little too optimistic I think for this author to state some bold things, given that we now have 4 years of history with which to draw upon, and that history shows that this president couldn’t run a hotdog stand! Yes, there are some good econpomic indicators, but what are the bad indicators? Take the unemployment rate first: it ticked up to 7.9%. So where did all the stimulus money go, which was supposed to create “stimulus?” Second, this president has stated that he will raise tax rates………during a recession!!!!What an idiot! Third is Obamacare. There are numerous companies that are announcing layoffs now after the election, bcause Obamacare will now be enforced and companies are scared to death of what will be the result, so jobs suffer, and the unemployment rate will now start to rise again is my prediction. These three reasons will suffice for now, but you get the picture, right?
We’re screwed, plain & simple. Only idiots make the same mistake twice.
Thank you for continuing to provide (factual/non biased) information. I too am planning for continued slow growth and anticipate that this administration must get our fiscal house in order which will lead to strong growth.
Thanks for bringing up the important questions.
Unfortunately, the recent election puts all hope in the hands of the government.
As Obama fails to give credit to the sophisticated economic system that made this country so different from his father’s country, American voters will gradually get un-educated to think about economic issues in terms of direct government intervention, this will only re-inforce the tendency to do more direct invention, which in turn will reinforce voters conviction that their government is their provider.
The result is a Europe, where those with a work culture are forced to pay for the socialism of all the other countries, who have no incentives for the individuals to look after themselves. Californians are becoming the Germans of USA, taxes will raise above 50%, and the American dream will be no more. Whether we like it or not, this is the most likely future for a nation in our current trajectory.
What a bunch of whiners and blamers. Obama didn’t create the economic crash and he can’t solve it. His policies may help numerous Americans to enter the middle class and buy or rent from you. Stop whining and start working. The election is over…
The election is over. The economy did not get to where it is overnight and cannot be fixed in a day. If Congress is interested in a trying to to fix what is broken, then they should work together and stop blaming each other and the President. Obama cannot fix this mess by himself. People in the real estate industry benefited from the stimulus package that was implemented to purchase homes. A lot of American jobs were saved when GM was bailed out of their crisis. A lot of American have benefited from the new health care laws. So stop complaining and start making sure we all can enjoy home ownership and have a better life because we are Americans!!!!
Please let’s clarify:
Mike, obama has been whining and blaming Bush for the last four years for everything under the sun, so let get real with that s**t. Unfortunately, people bought the blame Bush excuse for obamas’ failings, and decided to give poor baby another chance. The problem was started by the community reinvestment act of 1977, look it up. Bottom line, if you can’t come up with 20% down, show proof of income, and have good credit you should not get a mortgage. There is nothing in the constitution that says everyone has a right to own a home.
Jane, obama has had four years to do something positive, not one day. He repeatedly said jobs for Americans were his first priority, but clearly getting the nightmare healthcare bill passed was top priority. By working together you mean Republicans should do what the dems want. obama does not even meet with the congress to try to solve problems. Like he said on that awful show “the view” he is just the eye candy (HA HA HA HA PLEASE)He is a party, golfing, basketball, talk show guest, he is not a president
more whining and blaming… Suzanne: build a bridge…
Truthfully, I think the Obama Administration did well by the housing market, first with the tax breaks and then by coming to the defense of those home owners that had problems with banks and robo-signing. Also, keeping interest rates low is helping a lot. As fast as the housing market crashed, it’s going to take longer to get it back up, and I’m not sure it will ever get back to where it was, and that might be a good thing in some ways. Right now it’s a buyer’s market, and as the economy improves (and it has been improving), there will be more buyers ready for new homes.