A big part of my job is helping our clients project the most likely scenarios for the housing market. Now that we know who will be President, my job just got easier because we have 4 years of experience with Obama and a divided Congress, so we know what we are getting. However, there is never a dull moment. Here is what keeps me up at night:

• Mortgage Rates Dictated by Leadership: Geithner and Bernanke have worked closely together to implement very accommodative housing policies. Geithner has already announced he is leaving and Bernanke is rumored not to want another term beginning January 2014. Who will the replacement(s) be? Who will slow down the housing market when it heats up again – something I believe Bernanke is trying to engineer ASAP?
• Mortgage Rates Dictated by China: While Bernanke has a lot of power, the bond markets are more powerful. International bond buyers, particularly in China, can wreak a lot of havoc on mortgage rates if they don’t believe the U.S. will get their fiscal house in order. We need a plan to get our fiscal house back in order, or Reinhart and Rogoff’s “bang” moment is going to occur and it will not be pretty. I have faith we will figure it out, perhaps after we create a mini-crisis.
• Mortgage Availability: The tremendous mortgage subsidies that are currently in place, from low rates thanks to the Fed to low downpayments thanks to FHA, will continue. If, but more likely when, FHA declares technical insolvency later this month, I believe FHA will continue “business as usual.” I also believe we will eventually see Dodd-Frank rules that are reasonable, with appropriate risk-adjusted capital reserves for the banks, and huge disincentives to create ticking time bomb mortgages. Once we set the rules, the private mortgage market will come back.
• Economic Growth: We know what we are getting here because we are continuing on the same path. I am planning for continued slow growth, with the potential for strong growth if we get our fiscal house in order or we get lucky (shale oil, for example), and the potential for another recession if we don’t. Stay tuned.

When we surveyed our clients at our annual conference in June, 85% said that job growth was the most important factor for a healthy housing market. I just updated our forecasts this weekend, and I was pleasantly surprised by how strong the job market has become in so many markets. Over the last year, we have created 66K jobs in Los Angeles, 5K jobs in Las Vegas, 49K jobs in Phoenix, 97K jobs in Houston, 12K jobs in Tampa and 30K jobs in Washington D.C. Perhaps different policies would result in even stronger job growth. All I know is that is a lot of housing demand, with very little new supply.

In summary, let’s continue doing what it takes to create as many good jobs as possible, keep responsible mortgage liquidity flowing, and get our balance sheet in order. Those are bipartisan goals. If we do that, and I believe we will, housing will have a bright future.