From our President

The reports are unofficial as yet, but this mornings news reports that the Treasury is considering a plan that would lower interest rates on newly originated mortgages. According to the plan, the treasury would buy securities from banks to back the loans as long as banks lend the money out at 4.5 % on a 30-year fixed mortgage (1 point lower than the current market rate). This is a development that my staff and I are going to be watching closely.

The potential benefits to the housing markets are pretty obvious, but the benefits to the overall economy could be substantial, as well. The proposed program promises to deliver two fundamental components of a rescue operation: it will get credit flowing by restoring the ability of banks to lend and it will shore up spending. Stimulating private spending is a quick way to jump start a fiscal stimulus plan without waiting for the government to spend public money. In the mean time, as long as public spending is pushed along through the legislature at a reasonable pace, it will arrive in time to amplify the wave created by private spending.

A recent NY Times article, It May Be Time to Think About Buying a House, makes a strong argument for buying real estate now, particularly if you plan to stay put 7 to 10 years. The opportunity to lock-in a low mortgage rate for the next thirty years makes this especially compelling for first time buyers who aren't tied down from moving by an unsold home. How our economy performs in the next year is certainly uncertain, but uncertain prospects aren't a good reason to let good deals, tax credits and favorable mortgage rates pass you by. It is, however, a time for prudent & sober decision making. Simply put: buy only what you can afford, in a promissing location and start building up your equity.

Out of a desire to cultivate an optimistic outlook, we've been using the r-word sparingly in this blog. But that's not to say that we've been ignoring the gamut of opinions and prognoses about the future of the economy. We've been following it all, from soaring optimism to the grimmest despondency, selecting the most compelling analysis to share with you. So, about this recession of ours:

Wells Fargo economists predict that by the third quarter of 2009, even by this summer, consumer confidence and a diversified economic stimulus program will coalesce, creating intense momentum in economic growth. Jim Paulsen, senior economist at Well Capital Management, employs a powerful analogy. "It's like you're at a cookout and you're trying and trying to get your charcoal going and you keep squirting on lighter fluid and all of a sudden it goes poof!"

The root of this economic renaissance: the real estate market. "The sector that led the economy into the morass is about to turn the corner, perhaps as soon as this summer, and will start to lead us out."