There's a storm on the horizon, and it's being fueled by the promise of cheap mortgage money someday.
As long as buyers perceive that the future holds cheaper prices and lower interest rates, they're going to continue to sit on their hands.
"Money's cheap," I told a group of 30 high-FICO, low-taxable-income businesspeople at a recent seminar. "The problem is, most of you can't have any."
We lenders and agents depend for our livelihood on a shrinking pool of creditworthy buyers. Fannie Mae describes these riskworthy buyers like this: they're W-2 wage earners with low debt ratios.
I call them "Golden Buyers." Today's golden buyers work for corporations and medium sized companies--the same companies who are being strangled by a lack of credit to conduct business and to expand.
While the yields on government bonds are falling to all time lows, the cost of borrowing for the companies who employ our "golden buyers" has nearly doubled since the first of the year. Companies are paying an average of almost 11% for credit as the year comes to a close. Last January they were paying 6%. As costs rise, cutbacks are inevitable.
Golden Buyers are about to hit a wave of unanticipated layoffs.
The federal government has committed more than half of our Gross Domestic Product in an attempt to solve this credit crunch. So far, all it's done is to convince the world that corporations aren't a good place to invest money, that they can't conduct business on their own, and that the only safe place to put money is in government bonds.