Instability Creates Stability

Instability Creates Stability
I received this article from Rod Shuster, with Clarion Mortgage Capital and thought I would share it with you. Enjoy and happy new year!
We've been saying for a while now that the machinations occurring in the housing and mortgage markets will eventually lead to more opportunities; now others are finally catching on. Veteran banking analyst Richard Bove of Ladenburg Thalmann, an investment banking firm, received some media play last week for saying that he “expects housing prices in the United States to stabilize and/or rise after a likely boom in mortgage refinance, as mortgage rates fall and loan applications increase.”
We think Bove is right, and we've been saying so for the past few months. Perhaps we were early (or perhaps Bove is late). We also think the current housing market – as unpleasant as it has been – creates opportunity, and, paradoxically, stability. In fact, one can argue that the longer markets remain stable, the more unstable they actually become, at least that's the argument the late economist Hyman Minsky forwarded in an influential monograph titled “Financial Instability Hypothesis.” (Google Minsky's name and you can find the monograph on line.) In short, Minsky argues that too much stability (or good times) creates too much malinvestment, which leads to excesses and eventually instability (or bad times).
The opposite is also true: When times are tough, when everyone lacks confidence, when it seems housing prices will never stop declining, when everything seems chaotic, stability returns. We've seen this scenario play out most recently in the stock market: After the bubble burst in tech stocks, when everything seemed a mess, many companies became excellent buys. Everything in housing is messy these days, to say the least, but that mess means the market is more stable than it has been in the past few years.
We think Minsky is right in his analysis, which is why we (and apparently Bove) have been chanting that now is as good a time as any to consider either refinancing or purchasing a house.
For answers to your real estate questions, call Allison at 970-468-6800. Email - [email protected]. Rod Shuster, Clarion Mortgage Capital can be reached at 303-660-4210 or [email protected].  Want to know the value of your Summit County property? Visit   

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