U.S. hoping foreign investors will bail out housing market
And, if you were another country and saw what happened between Norway and the United States, would you be anxious to open your own reserves to scoop up U.S. housing and land?
Well, sane folks would no doubt say "heck no!"
But when it comes to international finance -- and, it would seem, real estate -- sanity may not be a word to throw around much.
The U.S., in fact, according to the Washington Post, is actually hoping that foreign investors will flock to the U.S. to fund the housing market, especially since, in short order, our own government is planning on dramatically scaling back its own emergency involvement, though there are skeptics (I know, skeptics! In Washington, yet!) who think Uncle Sam will get cold feet as some of the cutback dates fast approach.
Some brief history is in order here: Norway's government-owned funds (called sovereign wealth funds) took a beating (and that, my friends, is known in political circles as a gross understatement) when the U.S. real estate bubble burst.
As the Post reminds us, Norway's "holdings of securities issued by the mortgage financier Fannie Mae declined from a 2007 high of more than $15 billion, at current exchange rates, to just $5 billion as of Sept.30, 2009." It sent Norway's economy into a tailspin that it is just starting to recover from.
Despite this, Washington is keeping its fingers crossed that other nations -- maybe even Norway -- will fill in any void left by our government's planned exist from the mortgage-backed securities market.
There are, of course, those who apparently remain unconvinced. Writing on Investing to Wealth, Joe Weisenthal writes, "Word is that China is already encouraging its state-owned investment vehicles to dump anything that's not explicitly guaranteed by the U.S. government. And, generally speaking, there's just no good reason for foreign investors to rush headlong into housing assets that burned them in the past."
There is a lot at stake here: If the U.S. government does, indeed, start backing away from some of its support for the housing market, and if foreign investors can't be lured back in large numbers, many experts question whether the real estate market will be able to sustain the, thus far, tepid signs of any meaningful recovery.
And, there seems little doubt that without a full-scale recovery of the real estate market, we are unlikely to see a full-scale recovery of the economy in general anytime soon.
Charles Feldman is a journalist, media consultant and co-author of the book, "No Time To Think-The Menace of Media Speed and the 24-hour News Cycle." He has written about real estate issues for several years.