Wednesday, August 27, 2008

What Will Resolve Our Real Estate Crisis

What is going to take the real estate crisis that we are in and begin to stabalize it and allow us to move forward. For answers to my questions I look for people who on a macro-economic basis typically have a great handle on things. In this case, my source may sound like a strange one, but it is Jim Cramer, the guy on TV that talks stocks. While his stock picking can be good and bad, given his extremely thoughtful (and loud) analysis and long history of success on Wall Street, I have found his macro economic anaysis to be spot on most of the time.

This is what Cramer has to say:

"Jim Cramer's "Mad Money"
Cramer told viewers, that until the crisis that has enveloped Freddie Mac (FRE) and Fannie Mae (FNM) is finally resolved, the markets will continue to decline. In order for the market to finally bottom, said Cramer, housing has to stabilize. That requires lower interests rates, lower home inventory and higher home sales, and a resolution with Fannie and Freddie. Cramer said he stands by his prediction that the markets will not take out the lows set on July 15, but that prediction will not hold if the government doesn't step in soon. He started a new "Mortgage Mess Countdown" to see just how long it takes the Treasury to act and save the market from its continued slide."

I agree with what he has to say, but because FNM and FRE are huge political footballs, a clear resolution is not necessarily on the horizon. His point is that Freddie and Fannie are insolvent, and that these quasi governmental agengencies need to become full governmental agencies. While this might not be good for the common stock holders (although it hasn't been a very good ride up till now), it will be a good thing for anyone that has an interest in the real estate markets finding a footing.

To be continued.

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