Tuesday, January 27, 2009


Here is the text of an email I sent out to my database earlier today. Hope you find it of interest!

January 27, 2009

Good afternoon:

This morning I had the privilege of attending a 2009 State and National Economic Forecast meeting featuring Dr. Ted Jones, a nationally recognized real estate research expert who is senior vice president and chief economist for Stewart Title Company. Formerly, Dr. Jones was chief economist at Texas A&M’s Real Estate Research Center, the nation’s largest publicly funded real estate research organization.

In a diverse and wide-ranging discussion of the Colorado economy, Dr. Jones made a few points I thought I would share with you.

While the nation is most definitely in a recession, and a severe one at that, Colorado’s fundamentals remain better than most states in the country.

Because there was not a speculation-driven “bubble” in Colorado home prices between 2000 and 2005, we are not seeing anything like the corrections taking place in California, Arizona, Nevada, and Florida.

Unemployment rates should be at least a full percentage point lower in Colorado than the nation as a whole throughout 2009.

Lower oil prices are temporary, in Dr. Jones’ opinion. In fact, he fears we may see gasoline at $5 per gallon (!!) within 2-3 years.

Interest rate right now are artificially and temporarily low, in Dr. Jones’ opinion. With an $800 billion stimulus program working its way through Congress (and possibly even more to follow), Dr. Jones sees a short term injection of confidence and capital back into our economy, but the price will be significantly higher interest rates (he is predicting the mid 7’s on 30-year fixed-rate loans within 18-24 months - over 2 full percentage points higher than where rates are today).

What this means…

Well, we all know that we are living in volatile times. Expect that to continue for a while.

When it comes to purchasing big ticket items like homes, emotion and psychology play a huge factor in the overall health of the market. People are reluctant to take on large financial commitments when they are operating from a place of fear, and one of the primary objectives of any stimulus plan to come out of Washington will be to change how people feel as well as provide some short-term economic relief.

Based on Dr. Jones’ presentation, it seems likely that higher mortgage rates will be unavoidable in the future. Whether that shift happens in three months, six months or a year will depend on how people react to whatever help comes out of Washington.

Right now, confidence is low. So are interest rates. There is a direct relationship between consumer sentiment and how low a return investors will tolerate on mortgage-backed securities. When confidence returns, rates will rise. And that rise may well be tied more to how people feel than whether or not the economy is actually getting healthier.

So watch consumer sentiment. In reality, the stimulus package being debated right now may actually be more of a psychological stimulus package than a true financial stimulus package, even though its cost to taxpayers is unprecedented.

I’ll be discussing Dr. Jones’ presentation in more detail this upcoming Thursday night at 7 p.m. at the Arvada Public Library as part of my Home Buyers Workshop series. If you or someone you know is thinking of buying or selling a home in 2009, I would love to discuss this information with you in more detail.

In the meantime, if you have any questions at all, please don’t hesitate to give me a call.

Have a great week,

Dale Becker
RE/MAX Masters
(303) 416-0087