Real Estate Outlook: Obama Effect

by Kenneth R. Harney

Will there be an "Obama effect" on the housing and real estate markets? Barely days after his inauguration, it's obviously premature to make any forecasts.

But there's a case to be made that a quickly-enacted economic stimulus package, continued rock-bottom mortgage interest rates, low inflation and improving consumer sentiment could begin to have that effect -- at least in small measure. For example, the bellwether poll of consumer confidence -- conducted by the University of Michigan -- has just come out and it found consumer sentiment up by two percent in January over December. The component of the index that's based on "expectations" -- do you expect the economy will start improving? -- was up by three percent.

Now you can argue that January's bounce had nothing to do with the arrival of a new president and economic team in Washington, and was barely a notch over December's number. But the fact is: the arrow pointed up not down. Given the country's high expectations about the new administration, documented in every major poll on the subject, higher consumer confidence shouldn't be all that surprising.

Also, the massive economic relief package coming from Capitol Hill within weeks is virtually guaranteed to create jobs, and put more money into millions of households' pockets through tax breaks. You can argue that the stimulus package cannot possibly work its magic quickly enough to alter the course of the recession.

That's debatable and the full story won't be known for a year or more. But for housing, there's no question that a tax credit with teeth, nonrepayable and with a use-it-or-lose-it deadline, can only spur additional sales, maybe several hundred thousand over the course of the coming 12 months, according to some housing group estimates.

Meanwhile mortgage rates remain under five percent -- at least for applicants with solid credit and a downpayment. Inflation is close to zero: the CPI urban index dropped by seven tenths of a percent in December, and the energy index was down by eight point three percent.

Doomsayers may not be impressed by sales turnarounds, but anyone who sells -- or buys real estate and is looking for a great price -- can't afford to ignore positive signs

Your House Payments Could Be Lower Than Your Rent Payments!

With every rent check you write, you're helping to build equity in your landlord's property. That money could be going toward building equity in a home of your own. Today's rates are low enough that your house payment could be lower than your rent payment!

There are many advantages to owning a home, including:
Security - A feeling of security that comes from owning a home and the knowledge that your home is a safeguard against inflation.

Investment - Payments on your mortgage loan mean you are acquiring a major possession; instead of rent, you own more and more. The garden you plant, the permanent improvements you make - all enhance your way of living as well as the value of your home.

Tax Advantage - Your real estate taxes and the interest on your mortgage are deductible from your income tax.

Financial Independence - Most people start on the road to financial independence through home ownership. Your principal and interest payments remain the same for the full term of your mortgage while your rent usually goes up as the cost of living increases.

Environment - Your children grow up in the neighborhood of your choice.

Cash Equity - Better than a savings account, your home can appreciate to keep pace with inflation.

Satisfaction - Home ownership offers special advantages that make life more enjoyable - backyard barbecues, large family gatherings during holidays, a home workshop, a chance to enjoy your family's companionship in the privacy of your own home.

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Real Estate Outlook: What's in Store for 2009?

by Kenneth R. Harney
What will the new year bring for housing and real estate? It's easy to look at all the negative economic news in the headlines and say - there's no sign that 2009 is going to be any better than 2008.

But here's a different perspective to consider from one of the country's veteran financial analysts -- Richard Bove of Ladenburg Thalmann, the investment banking company.
In a research report issued late in December, Bove said he sees a positive dynamic taking shape in the current cycle. The government has intervened aggressively in the markets to push interest rates down -- most notably in the home mortgage sector.
Though it takes awhile for low-cost money to begin having its effect, Bove said he expects “housing prices to stabilize and/or rise (in 2009) after a likely boom in mortgage refinancings as rates fall and loan applications increase.”
Add in the expected massive economic stimulus package being put together on Capitol Hill with the incoming Obama administration -- and there's a good chance we're going to see a gradual transformation of the downward cycle into a slow rebound over the coming several quarters.
Already there are positive signs of the turnaround Bove predicts:
Mortgage applications are off the charts, mainly for refis but also to buy houses at affordable prices.
Rates continue to hover at 50-year lows - five percent and even four and three quarters percent for 30-year mortgages, and still lower for 15 and 20 year mortgage terms.
Plus we're all paying a lot less at the gas pump, and sharply discounted prices for retail goods and autos.
And guess what? Americans are actually SAVING again, the national savings rate took a nearly three percent jump last month. That might sound small, but it's hugely important if it is the start of a trend.
There are also some signs that housing prices are stabilizing in some parts of the country. The latest monthly Federal Housing Finance Agency index found home prices UP by six-tenths of a percent in the Mountain states and UP by two tenths of a percent in New England.
You can ridicule small regional gains as statistically irrelevant, but here's Realty Times's economic proposal to you for the New Year: Keep your eyes open for the small positive signs that are accumulating out there … because all downcycles tail off and come to an end.
We think the smartest players in real estate -- consumers and the industry - will make the most of the positives -- low-cost money, low prices, stabilizing local markets -- and thrive in the new year.