In the last couple of weeks, stock prices took major plunges and then achieved soaring gains, Treasury bills experienced record gains and then near-record losses, Lehman Brothers went into bankruptcy, Fannie Mae and Freddie Mac were taken over by the government, federal regulators seized Washington Mutual, and the government has almost finalized a $700B infusion into the economy. We definitely have more of a banking problem than a real estate problem.
As bad as the banking problem seems, I believe it is part of the final cleansing process. We need only look at the surge of home sales in California to know that we are close to the end of the current cycle.
The prognosis for Long Beach and surrounding cities during the recovery is very bright. The Douglas Park, with its creation of an estimated 11,000 new jobs and an annual payroll of $1B, is now underway. On top of this, Hollywood investors are purchasing the 1.1-million-square-foot hangar, across the street from Douglas Park, that was formerly used to build jetliners. They will convert it into one of the largest sound studios in the world. Even more jobs, and an even greater need for housing!
These two mammoth business enterprises will begin to enhance demand for housing in about two years, just as the housing market is reaching full recovery. These events will run up home prices considerably.
FHA Jumbo 30-year fixed ticked up another 1/8% last week. Where rates began the week of September 29.