What appears to have been a tsunami shock wave in the real estate and stock markets has actually created remarkable long-term investment opportunities in both areas.
As market values of homes have dropped 40% and more in some San Diego communities, affordability has increased markedly. Now 48% of San Diego households can afford to buy a home – up from less than ten percent. Improved FHA and VA programs are now becoming big factors in financing owner-occupied real estate as banks have tightened guidelines on conventional loans.
In spite of the negative economic news, there are many buyers now entering the marketplace as evidenced by the recent upturn in sales volume and velocity. Foreclosures are being absorbed (many with multiple offers) and resale inventories (which are now oftentimes highly competitive with foreclosure pricing) are contracting. New construction is also being rapidly absorbed as developers sell off remaining homes with attractive buyer incentives.
Hundreds of billions of dollars from the stock market sell off have found themselves into individual’s bank accounts especially since the FDIC insurance level was raised from $100,000 to $250,000.
The Federal government’s decision late Friday, October 10, 2008 to buy preferred stock in U.S. banks should have a further positive effect on liquidity in the mortgage markets.
Traditionally, sharp declines in stock prices are accompanied by renewed interest in the indestructible asset of real estate.
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