I Think it’s Good News
My optimistic side has taken over the blog for the moment, and wants to convince the rest of me that we’re on the downhill side of the mortgage meltdown mountain that the real estate market and the US economy have had to climb.
A couple of things have happened in the last week that have convinced me that we are really in the second half of this market.
First, Standard and Poor’s came out and said that the end of the write-downs is in sight. I’m choosing to hang my hat on this prediction, although I know it’s certainly a subjective analysis. But when I compare it to my calendar, which says we’re at least a year and a half into this mess, it makes sense. In another eighteen months we’ll be three years removed from the blind lending that created the problem, and the banks should have a handle on what’s left to come down the pike.
And the Fed has finally stepped in in a meaningful way.They’ve opened the discount window to investment banks, they’ve financed JP Morgan’s bailout of Bear Stearns and essentially indicated to the market that they’re going to be the safety net that insures (buys) these garbage loans. Is there a price to pay for that? Sure there is (they’re printing money and lowering interest rates in order to facilitate this increased liquidity - creating serious inflation concerns, but that’s a post for the economics blogs).
Add to the recent news the simple fact that buyers are back, financing is coming back, and the prices of these foreclosed properties are getting low enough to make sense again - and I think I can see a light at the end of the tunnel. As the saying goes, I just hope it’s not the oncoming train.
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