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Saturday, June 30, 2012

What Does Morgan Stanley Know???

Morgan Stanley predict a 5% to 8% decline in home prices between the fourth quarter of 2013 and the first quarter of 2014. What do they know? I think that they might be on to something.

They predict that retail home sales prices will fall 5% to 10%. They think that this has something to do with the feasibility of getting a mortgage along with the measures of affordability of our population.

Fannie Mae's economic research team put out a new report as well that predicts that home prices will reach bottom in 2013.

In Morgan Stanley's report they say that even thought there is a constant "household formation", the only choice that most households have is to rent. Even though there is demand for people to buy real estate, the inhibited mortgage credit availability is what is keeping people from buying. For investors, there is a high demand for rental properties because everyone needs a place to live. Think about it, if you can buy a rental property right now, rent it out and get over a 2% return on your money, then you are beating what the banks are giving you on any secured investment. Another option is to go to the stock market where your investment is collateralized with shares of a company that can go belly up any day, or you can buy commodities like Gold and hope that the price goes. The problem with commodities is that you don't get any monthly income, you only make money when you sell. In May, Bank of Americasaid the homeownership rate will normalize to 63% and remain there, pulled down by the continued flow of foreclosures. The national homeownership rate stood at 65.4% in the first quarter, falling 1% from a year earlier and 0.6% from the previous quarter, according to the U.S. Census Bureau.

“We are bullish on rental housing,” analysts at Morgan Stanely said. “In our view, the incremental demand for shelter will be largely met by rental housing. The homeownership rate, which has sharply declined over the last few years, is unlikely to revert to the highs attained during the middle of the last decade.”


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