Fallout from the Bailout?

Q: What does a potential bailout plan mean for the real estate market?

A: We were hoping to be able to write about the economic rescue plan in this week’s blog. However, as of the writing of this, there are only hopes that the Senate and House of Representatives will pass a plan by the weekend. There are expectations that there will be some decision on a plan by late Friday morning.

How this impacts the real estate market really depends on what is passed. The focus has been on the large amount of foreclosed properties nationwide and how to remedy this issue. Keeping homeowners in their homes should be a priority, however, for many lawmakers it is not. There are mixed feelings about consumers who took advantage of the subprime mortgages. The low teaser rates enticed them to buy high and now find themselves facing foreclosure or have been displaced by foreclosure. The plan may have a condition that requires the government to negotiate gentler terms with existing homeowners with the loans that are acquired. This may help some stay out of foreclosure.

It is hard to tell how a bailout plan will help the real estate market as a whole. In order to jump start the volatile real estate market and turn around the current trend, consumers need to start buying property and lower the inventory that is available. A plan may be able to present attractive financing but may not have ultimate control over generating buying activity.

One thing that is certain, and sales aside, real estate will always be a tangible, good long term investment.

Let’s stay tuned on this one. Once the plan is released we can answer more intelligently.