I am worried about the stock markets' gyrations and how that might affect the real estate markets. Do you have some perspective as to whether we might be going into another financial crisis?
--Several loan officers asked variations of this question.
There is no doubt about the fact that the recent stock market's correction, rebounds and general volatility has caused consternation regarding our economy. While I will not predict the future, I don't think it necessarily means we are entering into crisis stage. Remember, our last crisis was precipitated by people buying houses they could not afford. Our present tighter underwriting guidelines does not eliminate that possibility, but it certainly puts us on more solid ground. Plus, we were due for a stock market correction after years of gains.
Right now, all indications are that our economy is on solid ground. We are adding jobs at a healthy rate. This does not mean the economy is booming by any means, and that fact is actually good news with regard to inflation and future interest rate increases which could slow us down. There is also a lot of cash out there held by companies and individuals. If stocks become too volatile, investors will be looking for alternatives. These alternatives would include bonds, precious metals and real estate, among others. Thus, if stocks are due for a slump, it could help the real estate sector. On the other hand, uncertainty could cause others to think twice about purchasing. The future is very hard to predict.
Dave Hershman has been the leading author and a top speaker for the industry for decades with six books authored and hundreds of articles published. His website is www.originationpro.com. If you have a reaction to this commentary or another question you would like answered in this column? Email Dave directly at [email protected].