James Owens

Caterpillar's CEO, James Owens, was interviewed today on CNBC and was relatively upbeat, predicting a soft landing for the U.S. economy as a whole. (Source: CNBC)

As some of you are aware, Owens' negative comments last week - and the journalistic interpretations thereafter - were largely responsible for a drastic decline in the stock market. However, today, Owens backed off some of his recessionary comments and more narrowly defined the scope of the same to deal specifically with real estate and related markets. Most importantly, Owens stated that the real estate market is unlikely to turn around until the middle of next year. The converse suggests that he believes the real estate turnaround will begin sometime in the middle of next year. (Source: CNBC)

Why were these comments significant? As the CEO of Caterpillar, and given the nature of the company's various business interests, Owens is intimately familiar with the real estate market. I find the middle of next year as a possible entry point for a real estate recovery to be encouraging given the more pessimistic expectations of many "experts." Moreover, given the fact that job and wages reports show recent improvement, I reiterate that residential investment properties are attractive at this point and time. Keep in mind that in conjunction with the above, Countrywide Financial Services estimates that 86% of the subprime loans they approved in 2006 would be denied under their current underwriting requirements. (Source: CNBC, WSJ)

Hmmm...residential real estate prices are lower than they have been in recent years and people are employed and receiving higher wages, yet many cannot qualify for loans. That sounds to me like a recipe for rental profitability, which should only increase as foreclosures continue in the immediate future. As always, the advisability of investing in rental property is predicated on a person having the risk tolerance to be a landlord in tenant-friendly Massachusetts.

With respect to my previous blog entry, although it is true that Countrywide Financial Services is reworking adjustable rate mortgages as stated, there are indications that they are using delinquency as a prerequisite for altering these loans. That being said, this remains an opportunity to be explored by those of you who are behind, or are in jeopardy of falling behind, in your adjustable rate mortgage payments. (Source: WSJ)