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Economic Update: $700 Billion Bailout, Real Estate and Financial Markets

As national housing woes continue to be a drag on the overall economy, the government was able to step in and provide much needed liquidity to financial systems. As congress, the Federal Reserve and the Treasury Department, continue to navigate through the current credit crisis several key factors must be watched by mortgage and real estate professionals. Below we provide an overview of what time it is…

National Housing Downturn

The national housing decline continues to hold as sales of existing and new homes fell further in August. At this point new home sales are at a 17- year low. In addition, the median home price for new homes is at a four-year low. As foreclosures continue to rise and credit remains tight the national scene will remain a bumpy ride, well into 2009.

Bullish on Houston Real Estate

As we have stated many time before Houston is still one of the strongest real estate markets in the nation. Several factors have allowed Houston to avoid the national real estate woes. Going forward, Houston should continue to be a safe haven for those seeking to buy real estate. However, the current credit conditions appear to be keeping some potential home buyers from jumping into the market. For investors, now is an excellent time to buy for appreciation. With less people purchasing homes, rental markets will begin to deepen and provide an opportunity for investors willing to buy and hold for long term appreciation.

Government Intervention Not Over

One of the biggest issues facing the economy was solved when congress passed, and the president signed, $700 billion dollar package to provide much needed liquidity to our financial systems. This was the largest government intervention ever done for our financial systems. This more than likely will not be the last of government intervention to not only assist our financial systems but also the overall economy. Several government stimulus efforts are under consideration within congress.

Recession & Inflation Update

With the overall economy in a recession, the government appears to be taking the necessary actions to ensure that we do not enter into a deeper and more prolonged recession. However, as we enter into 2009, realtors, mortgage lenders and investors will need to keep a watch on unemployment which is the key driver for demand of real estate. If the recession intensifies and unemployment continues to rise we could see some short term drops in real estate. On the inflation front, oil prices have been falling which is causing the fear of inflation to abate. This was a much needed sigh of relief for our overall economy.

Cliff Pape
Home Buddies