Dean Rizzi

What Now?
May 3, 2010 ·  

It’s an important question, since it appears the homebuyers tax credits won’t be extended. But it’s a question not to be feared. We think it’s time the housing market stood on its own feet anyway. After all, we can’t gauge the health of a market if it’s still supported with taxpayer stanchions.

But that’s okay; we think the housing and mortgage markets are sufficiently healthy to stand alone. Pessimism is the intellectual position, but the fact is the economy is getting better: Despite worries that American consumers might hunker down for years — spooked by debt, lost savings, and unemployment — austerity has given way to shadows of a new shopping spree: households are replacing cars, upgrading home furnishings, and amassing gadgets. What’s more, wealth – at least wealth measured by equity holdings – is booming.

On the mortgage side, private investors are returning. A California firm recently completed the first private-sector sale of a security backed by mortgages in nearly two years, potentially reopening a market slammed shut by the housing crisis. The $238-million deal was of the highest quality, to be sure, with borrowers making an average down payment of 45 percent and mortgage payments comprising less than 30 percent of income. But as the economy continues to improve and investors become less risk adverse, less restrictive mortgages will be securitized.

Bottom line: we see a growing economy, improving employment, stable home prices, and less restrictive (though higher rate) mortgages in our future. In other words, we see a market for buying and refinancing today.

www.deanrizzi.com

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Comments

One Response to “What Now?”

  1. Brian Boisson on May 5th, 2010 9:06 am

    Dean,

    Thanks again for your analysis and your “reading” of all the data for us!

    Brian

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