Ask A New Jersey Closing Expert

His speech and words moved the market. These are his words to help stimulate our economy:

                   Excerpts provided by nytimes.com (http://www.nytimes.com/2008/01/17/business/17cnd-fed.html?_r=1&hp&oref=slogin)

 “We currently see the economy as continuing to grow, but growing at a relatively slow pace, particularly in the first half of this year,” Mr. Bernanke told the House Budget Committee, acknowledging that conditions are worse this year than in the “reasonably good” second half of 2007.

Turmoil in the financial markets, rapid increases in oil prices and a badly slumping housing market are part of “a confluence of different events that makes this a difficult combination of circumstances,” Mr. Bernanke conceded.

 Mr. Bernanke rejected the term “recession” for the present conditions and what lies ahead, he said the full effects of the housing slump and the accompanying mortgage mess had yet to be felt.

“Our expectation is that delinquencies will go higher and that there will be ongoing losses in the subprime area,” he said. Asked to put a dollar figure on total losses, he said, “I see so far about $100 billion, but it certainly could be several multiples of that as we go forward and the delinquency rates and foreclosure rates rise.”

My thoughts to his words were that we are yet to see the worse to come in the housing bubble breakdown. But with this year in my opinion will come the resolution of the foreclosure scare and this will lead to stabilizing of housing prices. Coupled with low interest rate as is the result of the Fed’s continued reduction of the Fed Funds Borrowing (which is expected to be cut by upto 50 basis points in the Janurary meeting), will lead to a health stabilization of the housing market by the end of 2008. But this year will bring lot of misfortune to companies heavily vested in the housing market apprecation along with service sectors tied to the housing market growth. There will be increased unemployment and a lot of seller abandoning their homes to go rent. If you have the means, it may not be a bad market to pick up multifamily residences that should cash flow positively with the increased amounts of tenants back in the market. We are back in the early 1990’s market in my opinion, where the foreclosures are going to set the market price.  My two cents on this very important speech. Chime in with your comments.

 Your friend,

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