I’m like everyone else. All I can do is take what I’ve been taught couple it with my experiences and what I’ve learned to make what to me appears to be an informed decision.
Therein lies the rub at least as far as this real estate debacle is concerned. I look at the foreclosure filings in my county and see they are up. I read articles that tell me other areas, with few exceptions, are also experiencing an uptick in foreclosure filings.
I combine the two pieces of information and come to the conclusion the foreclosure mess will be with us for the remainder of 2008 and likely throughout 2009. I also deduce, maybe incorrectly, that the turn around won’t happen until 2010, if then.
On the other hand, I also read articles that tell me this mess will bottom out in 2009. One of the reasons stated is that people are staying away from the real estate market today because they don’t want to buy an asset that might lose value right away.
Wouldn’t it stand to reason that if the mess isn’t predicted to turn around until 2009 anything you buy today will lose value? And if it doesn’t turn around, won’t you continue to lose value?
In fact, if I am right and this thing doesn’t turn around until 2010, today’s buyers will be in the same position their predecessors were in, i.e. owing more than the asset is worth. What is to prevent them from walking away? Does this mean the “turn around” will only be two or three months in duration?
I also factor the rising costs of such things as gas prices, groceries, utility bills, clothes and other life mainstays into the paradigm and for the life of me can not see how anyone can say, with a straight face, 2009 is the bottoming out year.
Let’s not forget that big brother is pumping tons of cash into the economy at break neck speed. For the economists in the audience, you already know this is inflation. For the rest of us, it is still called inflation.
Inflation is nothing more than robbing the citizens of their wealth and transferring that wealth to the government. There are many good sites that explain the principle more eloquently than I could so if you want to learn the mechanics, please visit one of them.
If what I said is true, this spiral can only continue one way. Again, if that is true, ALL of us will be living in homes worth far less than they were yesterday and indeed may even be worth less than their current mortgage balance. Heck, they may be worth even less than what we paid for them ten years ago. How about that for a kick in the pants?
Mind you, this won’t be because we were bad borrowers or because we didn’t obey the laws of economics or finance. We did but the 800 pound gorilla didn’t. Is there an answer?
If you weren’t born yesterday, you know there is an answer. You also know the answer is to change the players and not the game. The game was working just fine and sustained both people and economic growth in an orderly manner.
The players who need to be changed are the regulators. At least I think that is the first crew who should be sent to Exile Island. It is these guys who took the reins off sensible lending practices and looked the other way when every Tom, Dick and Harry in the lending business wrote their own rules instead of following established guidelines.
Rather than make this a 5 page post, I’ll stop here and ask that you to tell me what you believe is/are the answer(s).
Read PART II of this Post.