Will The Real Estate Market Be Normalized By March 2010? |
| According to the Wall Street Journal the Fed isn’t too concerned with the housing market. Citing improvements ahead of schedule the Federal Reserve Bank remains on track in its plan to stop purchasing mortgage backed securities in March 2010. According to Federal Reserve Bank of Dallas President Richard Fisher, no extra intervention is needed to keep interest rates under control. But is the market really getting back on its feet and if so, what does that mean for people investing in seller held mortgage notes, deeds of trust and other land contracts? |
|
|
To find out the answer we have to step back to the roots of the original housing market crisis. The loans system wad dysfunctional; there was no incentive for individual loan agents to ensure that debtors could pay off their mortgages. Meanwhile the market developed ever more inventive ways to repackage pools of mortgages, which included packaging suspect mortgages with legitimate ones to boost their ratings by association.
|
|
| As we know, it all fell apart on 2008, and the connections between these toxic investments and the banks that pushed them seriously injured the global economy. Nevertheless, all of this happened several tiers above the economic fundamentals which should drive the housing market: supply and demand. Mortgage backed securities and unwarranted enthusiasm allowed investors to ignore the true demand from qualified borrowers, leaving a surplus of housing. But for the private note holder, one thing needs to be made clear: Demand never really went away.
|
|
|
True demand for housing in any form is a function of population growth, because no mater their credit ratings, people need shelter. What they didn’t need was the type of housing – new, large, single family homes – pushed by loan agents eager to sign people up for mortgages they couldn’t afford. That means investing in housing is still a smart bet, because you can’t argue with an essential. All that changes is the type of property. In many cases, your best bet may shift from pools of notes for individual homes to private mortgage notes for multifamily dwellings.
|
|
| In addition, demand for housing has always been, and remains, highly localized. People investing in mortgage backed securities might not care about this, but as a private mortgage note holder working with individual properties, this is vitally important for you. Many regions buck the trend for decreased demand for single family dwellings.
|
|
| Market normalization should finally allow these realities to “step out of the shadows,” so to speak. With the toxic chain of bad loans and investments out of the picture, the housing market will start taking its cues from true supply and demand rates across the country. If you’re looking at a property that’s in genuine demand, chances are that this reevaluation will allow you to create a seller-held note that reflects this, making it a valuable investment. Remember, too that you always have the option to sell your note. If you’re thinking of converting a mortgage note to cash flow, ask us for a free note quote. |
|
|
|
DMO Direct Funding, 218-A E. Eau Gallie Blvd., #110, Indian Harbour Beach, Florida 32937
Main Office: (321) 777-2834, info@DMODirectFunding.com
Copyright 2008, Buyers of Seller Held Mortgage Notes
|
