Financial Markets and the Housing Sector

Unless you’ve been lost on a deserted island over the last 2 years or so, you’ve probably heard about what’s going on in the financial markets out there. The government stepped in and finally approved a bailout bill to take all of the bad debt and non- performing mortgages and paper off of the books for so many banks and companies that drive our economy. And regardless of whether you agree with their plan or not, it was a necessity. It was actually the lesser of the two evils.

I firmly believe that the markets would have “eventually” corrected themselves, but not until after a long drawn out period of recession that was inevitable. Now that they are working on a plan, finally, to make the banks allocate the funds to stimulating the economy, and not paying bonuses to executives, we should start to see some relief over thye next several months. The government is now playing with the idea of a government owned “bad bank” to handle the non performing paper that’s out there.

And Obama will eventually have a tight grip on how these corporations are using government bailout funds. With the bad mortgages taken off of the books, the banks credit rating goes back up, they actually have money in reserves again, they have working capital, and they can actually put mortgage money back into the market place for home buyers and investors. Personally, I think a lot of this bailout money should actually come from money already stashed for some of these exec’s parachute retirement plans and exit packages. And did you hear that they’re still busting companies that received tarp funds for paying huge bonuses?!

Anyway, that being said, this situation has made the stock market and equities a terrible place to be. The Dow Jones industrial average dropped below 10K on Monday Oct 6th, 2008 for the first time since 2004, and continued to drop until it finally got some support around 8K. 8K! When it was at 14K just a year ago. Most experts continue to believe that the stock market will continue to rise and fall irradically for the next 2 years or so. It continued to float around 8K or so for several months, and we finally just got back above 10K last week in October of 2009! You have to understand what’s happening there.

So many people have lost so much money that they’re trying to time the market and make some of it back. Volatility is a scary, scary thing in the markets, but it also creates big swings to the up and down side, and with that, some think, opportunities to make a quick buck. But, most times they wind up pulling their hair out and losing more money. Anyway, with all of the volatility in the equities market right now, people are scouring their options to find a safe place to put their money. What’s left of it.

So who will the real winners be in all of this? The smart investors that are buying depressed real estate right now, will come out of all this ahead of everyone else. Why? Because real estate will always be the long term winner. There are deals being had right now in the housing market that are unprecedented in history.