Congress approved a massive $700 billion rescue bill earlier this month, paving the way for responsible government intervention in the financial markets, which will benefit current homeowners, potential home buyers, financial institutions, the economy, and ultimately taxpayers.
The Emergency Economic Stimulus Act of 2008 gives the U.S. government the authority to buy off troubled mortgages. This will encourage banks to refinance and reconfigure more mortgages to help many families keep their homes.
It will also introduce more money into the system, which will make financing more available and help stabilize home sales and prices. If credit markets remain tight, even families with strong credit and income might not be able to obtain a mortgage.
One Real Estate Professional commented to me, “I called my congressman, as a real estate broker to find out if I could go for a ride on this gravy train, but they still were not sure who was going to execute this program. It will end up with the treasury department.” He further discussed short sells as an example of where the market is today in terms of straightening itself out from the subprime mess by stating, “This whole short sale scene is getting slower by the day. I was working on one today from the time they missed their first mortgage payment until they were ready to go to foreclosure will be 9 months. They have lived rent/mortgage free for 9 months. It is only going to get longer and we have about 6 more months for the arms to kick in before the subprime breaks were put on. I could see it taking a year and a half to go through the process in the near future. “
A Senior Asset Manager at Grubb & Ellis Realty Investors out of Denver commented, “Some of the answer is that real property assets are much less expensive now than they were in the second quarter of 2008. Its not clear what the pricing floor is. If a client has cash, now is the time to be shopping because economy mitigation efforts from governments around the world are being employed so the current “free fall” starts to be with out basis. Prices could be lower, but not, I hope, tremendously lower. “
He also provided some very good real property purchasing tools;
1) Be choosy and discerning and discriminating in acquisitions.
2) The investment horizon is at least 8 to 16 quarters.
3) Be extremely bearish in growth assumptions when building real prooperty acquisiton models because income/value growth will very slow as long as retail sales and employment are slow or non-existent.
4) Leverage to the extent that you can but terms must be fixed and the lender experienced in real property. They must be ready to live with the inconsistencies that will occur quarter to quarter. Client integrity will be important as well as committed equity partners.
He followed his kind note up with a “Best of Luck.” Definitely, Best of Luck to us All.
