A Little Good News??

Well, as Thanksgiving approaches, I was trying to think of what I should be thankful for this year.

There are the standard, obvious ones like my family, my health, etc.   What I’m particularly looking for is something that might be some kind of sign that confirms my belief that the economy and the housing market (which clearly is near and dear to my heart) is going to get better soon.

Here’s what I cam up with.

So far, I’ve heard news reports that 3 different corporations (the most recent being Citi) have decided NOT to pay end of year bonuses to execs.

To those of us on “main street” not paying bonuses to execs who have been on board while a company is on the brink of failing, might seem to be no-brainer. Obviously, though, the execs haven’t seen it that way – until now.

Of course, they woudln’t be making this move without the public scrutiny but they made the move nonetheless.

The thankful part, to me, is that whatever the motivation, it seems that if 3 companies have done it, others will have to follow.  This is the first time, in my memory, that there seems to be any acknolwedgement by big corporations that they need to act as if they care about the economy and about the general public.

So maybe – just maybe – there will be other bold moves that corporate America will make to accept some responsiblity and take some action, whatever their reasons for doing it, which might help to turn things around.

Maybe  – just maybe – the plans that Mr. Obama has will be able to work and we’ll see some improvement in the economy in 2009.

Maybe – just maybe – people will be able to sleep at night without worrying about all the economic problems that face America and the world.  Maybe the new Democratic administration will receive some bi-partisan support from both the public and private sector.

So – I guess my thankfulness is really for the hope that I have.

Happy Thanksgiving to all.

Real Estate Standoff

If you watch the national media, whether it’s the left-leaning, right-leaning or middle of the road (is there really a MOTR media?) one thing that most of the pundits agree on is that the housing market is at the crux of our current economic crisis. There’s a lot of arguing about who is to blame for it, but most agree that if houses would start selling, we’d be on the road to recovery across the board.

The actual reason for the depreciation in housing prices is as basic as Marketing 101 – Supply and Demand. The number of available homes in nearly every market is much higher than it was as recently as 18 months ago – and if you compare it to 24 – 36 months ago you could find as much as a 200 – 300% increase in the number of homes on the market. Naturally – this means that prices will be lower since the number of buyers has remained essentially the same. Makes sense – doesn’t it?

Let’s take my favorite town – Anytown.

In November, 2006 there were 10 people ready to buy homes there. There were 13 homes on the market.

In November, 2008 there are still 10 families looking to buy homes in Anytown but now there are 30 homes on the market.

Certainly you can see why prices are lower – there are more to choose from so the buyers take their time. They look, think; look, think; and then look and think some more. Meanwhile, there are more homes coming on the market simply because of normal housing factors PLUS an increased # of foreclosures due to the over extension of consumer credit in 2003, 04 and 05.

Potential buyers want to buy and potential sellers want to sell but they are both wary of making the wrong decision.

So we have a standoff.

I bought my home in the spring of 2007. It is now worth about 20,000 less than I paid. As Tommy Lee Jones said to Harrison Ford in “The Fugitive” when he swore he did not kill his wife:  I Don’t Care.

First of all, I’m not planning on moving anytime soon, so the value of my house being less than I paid doesn’t matter. It will cycle back up again – someday.

Secondly, if I did choose to move now, the home I would be buying would also be significantly less in price than than it was 2 years ago so what does it matter?

What we need is for someone to instill a little confidence in the country so that the buyers who want to buy and the sellers who want to sell are not afraid to take the first move. Remember – A Journey of a Thousand Miles, Begins with a Single Step.

Paulson Changes Terms of Bailout

Treasury Secretary Henry Paulson announced yesterday that the financial Bailout, officially known as TARP (Troubled Assets Relief Program) will not, as originally envisioned, be buying any troubled assets.

Instead, the money, approved by Congress, will now be used, per Paulson’s remarks on November 12, to inject capital into the tills of the banks. His hope (as many who propose “trickle-down” theory) is that having more money in their coffers will encourage banks to free up lending and help consumers buy and/or remain in their houses.

Reaction to this has been, for the most part, pretty negative amongst the Senators and Congressmen who voted for this plan (many risking their own re-election hopes by voting). They thought, because they were told, that they were voting for a plan which would flow money to consumers on a fairly direct path. Now they are being told that the decision of whether or not this money ends up in the hands of consumers, is being put in the hands of the executives of the banks who helped get us in this mess in the first place.

To read more about it and see a video of Paulson, you can link to a CNN commentary HERE.