We've gone offbeat!
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by Broderick Perkins
© 2008 DeadlineNews.Com
Unauthorized use of this story is a copyright violation -- a federal crime
Deadline Newsroom - Among likely scenarios for the mortgage money market, it's most likely that home financing funds won't begin to really flow until 2010 and it could take up to three years before the credit crunch fully disappears.
With the squeeze on money to finance growth in a sector considered a major cornerstone of the national economy, Brookings Institution Senior Fellow Anthony Downs has written a book that paints a grim picture of what's in store for mortgage money and the housing market.
"Real Estate and the Financial Crisis" ($29.95, Urban Land Institute) says only time, cheaper real estate prices, a more balanced comparison between real estate and other asset values and higher profits for property owners will just begin ease the crunch.
Downs proposes four possible scenarios and the likelihood of each.
• 1. A weak U.S. recession with the speedy return of credit availability by late 2009; a 15 percent likelihood of occurring.
• 2. A strong U.S. recession in 2009, continued lack of real estate credit availability until 2010; 65 percent.
• 3. A serious U.S. recession, collapse of the dollar, higher interest rates and a prolonged recession through 2010; 8 percent.
• 4. A two- to three-year recession, massive federal spending, inflationary pressures, high interest rates;12 percent.
There will be no return to the easy availability of financial credit for real estate during most or all of 2009. Only in 2010 and beyond will such a return be possible, though certainly not assured. That situation is consistent with the likelihood of the 2008-2009 American recession lasting well into 2010." -- Anthony Downs, 'Real Estate and the Financial Crisis'
Downs also says a few fundamentals are likely.
• The credit crunch will not end quickly, but will take at least one more year and perhaps up to three more years to disappear.
• Real estate capital markets will gradually improve as investors become impatient with low yields on other assets and as more property owners accept the need to give investors higher returns.
• The fate of real estate capital markets is tied to the performance of non-real estate investment trust sector of the broader stock market. The better the stock market sector does, the longer it will take for real estate to recover.
The book delves into an analysis of how the financial markets crashed and the resultant fallout in the housing market, commercial property markets and mortgage backed securities.
It also analyses public policy responses and recommends future policies to improve the financial system with new approaches for operating within a shrinking financial system; by responding to a shift in housing and financial policies, and through approaches for stabilizing commercial real estate markets.
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© 2008 DeadlineNews.Com
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Broderick Perkins, an award-winning consumer journalist, parlayed 30 years of old-school journalism into a digital real estate news service, the San Jose, CA-based DeadlineNews Group, including DeadlineNews.Com, a real estate news and consulting service and Web site, and the Deadline Newsroom, DeadlineNews.Com's news back shop. Perkins is also a National Real Estate Examiner. All the news that really hits home from three locations -- that's location, location, location!
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