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Thread: Is it time to invest in US real estate market?

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[quote=GEARBOX,343678]Short answer is no.  The long answer is that market values have declined 20-25% compared to an over 300% increase over the past two decades.  This was mainly fueled by the steady devaluation of the US dollar and the treasury printing more money to prevent the economy from falling into a recession (a mistake in my opinion).  As a result, this huge influx of cash spawned the sub prime mortgage market which in turn allowed more people into the real estate market thus driving up values to astronomical levels.  Now let's look at this more critically.  Fannie mae and Freddie Mac was the main cause of this melt down, not because all the morgages went bad, actually only 4% was non accruing, but because the CEO's of both companies with held reporting this for years in order to show more profits and insure their 90 million dollar annual bonuses.  When the bad loans were finally uncovered, shear panic took over and no one wanted these morgage backed securities.  Despite still paying interest, these once highly liquid triple A investment became a long term asset.  Well needless to say, banks invested heavily into these instruments counting on its liquidity to meet current obligations and to get a better than US T bill rate of return, as well as pension funds, investment houses, et al.  And the rest is history, banks could no longer make loans and the economy stopped dead in it's tracks, the stock market crashed, and corporate America took this opportunity to downsize.  But what are we talking about?  A 4% loss in the mortgage markets?  Well just to give this more clarity, the 4% is still secured with underlying real estate.  Is it worth 100%?, no, 70%?, maybe, 50%?, absolutely.  So the total loss is really only 2% at worst.  But fear and panic has taken all of us on this wild roller coaster ride.  I don't see any real further errosion of the housing market, but I don't see much of an upside either.  Despite a Democratic incumbant (BTW you do know that both CEO's of Fannie and Freddie where high Democratic officials, one being Former President Clintion's financial advisor) I don't see that the American public will allow for a "no oversight" situation again for these companies. 
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