Friday, March 7, 2008

The Federal Reserve is WRONG

Now that Fed Chief Ben "Hanky Panky" Bernanke has begun to acknowledge the housing crisis and its true impact on our economy, the "private recession" in the housing market is becoming public knowledge.

The fact is that "Hanky Panky's" statement the other day about how he wants Fannie and Freddie to "raise more money to purchase loans" and allow people to switch from subprime to federally insured mortgages be will only create further problems for our economy down the road. Since real estate is cyclical, we will eventually have another downturn. The bailout of that next downturn will fall squarely on us taxpayers.

This leads me to believe that the government is beginning to think that it is necessary to bailout the homeowners that are in trouble. THIS IS THE WORST THING THAT CAN HAPPEN.

What we really need is to have housing prices FALL. Yes it will be painful in the short term. The long term benefit of the lowered cost of housing is that "Joe Six Pack" can then actually AFFORD his home, while utilizing CONSERVATIVE mortgages that have none of the ugly surprises that the exotic mortgages of the past held buried within.

We never had this kind of growth in the housing market before, and we hopefully will never have this radical a downturn again....but the next downturn absolutely depends upon our handling this one properly.

I have already seen the benefits of lower cost of development property begin to stimulate that sector of the market. We need for this to apply across all real estate market segments that were inflated beyond their true value.

The bottom feeding has already begun in the residential development world. Lots that builders were paying big bucks for two years ago are now selling at amazing low prices. I am showing a subdivision today that is only $12,500 per FINISHED, pad-ready lot....former retail value over $60,000. This is located in a good area within Central Florida. Hedge funds are beginning to invest in these opportunities with billions of dollars available for 3-5 year projected holds.

I believe that the availability of reasonably priced lots will eventually help with the cost of housing, as long as there is a true downturn in retail housing prices. If the retail prices do not fall, builders and bulk investors will make too much money, possibly causing yet another crisis.

Meanwhile, if anyone wants a deal on some development property, hit me up!

Til next time,