Ted Muftic is a chief investment officer for private equity firm focused on real estate.For his credentials, see www.mufticforum.com/about us
Usually the Government can do some good, but not when it comes to changing the fundamental dynamics of a “bubble burst”. I see no current nor historical evidence of government intervention in reversing a burst ever actually working. I generally agree with the administration on a range of economic matters, but I feel they let their political instincts get in the way of sound policy. I thought we would hit bottom nationally in home prices by the Fall of 2010. I predicted this in Fall of 2008 before all of the attempts to “stabilize” the market came from Washington. These policies had some positive impact on prices, as well as the effect of improper foreclosures practices being discovered, but now we are heading back down. I would expect this to put a drag on economic activity of about .5% this year, but no second dip recession. Most of the impact will be felt in markets that haven’t experienced much declines, such as the mid-Atlantic and Northeast U.S. I would not be a buyer of homes in those markets personally. There will eventually be a bottom of the market – but the severity of the decline will actually be directly linked to the mortgage market recovering strongly, and underwriting standards loosening. Again, now is the absolutely worst time to try and “resolve” the Fannie/Freddie “issue”. Also, Fannie and Freddie mortgages that have at least 20% down payment should be allowed to be packaged, sold, and held by banks without any requirement for a 5% withholding of capital in reserves. These types of mortgage have historically represented the safest, most reliable products around – and they will be the backbone of the recovery in home values and consumer confidence.
Theodore B. Muftic
Chief Investment Officer
Invenio Capital
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