I was searching Google News Stories this evening about 'real estate' and came across a very interesting article. It makes sense economically. The name of the article is "Another real estate crisis is about to hit!" This time it will the collateral damage of layoffs. It was written by By Paul Craig Roberts who has incredible credentials (Former Assistant Secretary of the Treasury, Associate Editor of the Wall Street Journal, and He was awarded the Legion of Honor by French President Francois Mitterrand.)
The basis of the story is really how we live in America, too much credit, and not enough savings. As savings and frugality disappeared, the excesses of our society can be easily seen in consumer spending which became over 72% of GDP. Those excesses in easy cedit fueled our residential real estate growth, and also commercial real estate growth. The second part of our real estate crisis he likens to a second Katrina hitting New Orleans before the effects of the first Katrina had abated. The problem is the same Government that caused this is about to throw more fuel on the fire with even more credit debt. I would love to hear your thoughts on the the article. It is well written, and easy to read. There are many sobering points.
Another real estate crisis is about to hit
By Paul Craig Roberts
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Or 888-940-0074 Toll Free Office
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That is one serious consideration; another that most are discounting is that there has been a massive amount of homes that have been leased over the past year that will be coming on the market for lease or for sale this year.
If the market is able to rebound strong enough, it may handle either of these concerns. The key will be for the little switch in the brain of the public to turn on. i.e. Instead of this economy stinks and it is going to get worse...to this economy stinks, but things are going to get better.
Time will tell........
Tim Moncrief, Co-Owner-Bartlett RE Group (Keller Williams Realty ) The fundamentals of irresponsible easy credit cannot be fixed with more credit. We need to question our elected representatives. Time is now telling us, it doesn't work.
I suppose in addition to more rentals many new purchases will be for those downsizing Jim.
Gary Woltal - REALTOR® Dallas Ft. Worth (Keller Williams Realty) I think a lot of turning this market around will be "right-sizing!" People bought homes that were more than they could afford, drove luxury cars as if they hit the lottery, and part of the fix is correcting the excess. More modest energy efficient homes, energy efficient autos, more affordible homes, cheaper cars, more affordable living and saving.
Jim, it's all an indication that the recession is far from over and has yet to find a bottom. I agree with the article's statement that our new "leaders," those chosen to deal with the crisis, are the same bunch who started it all. How can Americans trust a government when the choice for Treasury Secretary is a tax cheat who lied about it being a mistake. I use the same software he says he did; it won't allow the "mistake" he described.
John Mulkey, Housing Guru (TheHousingGuru.com) It is pretty sickening, how most persons do not get what is happening. It wasn't changing the presidency, it is Congress that caused this mess. The king pins are all still in office and now they have more power! If housing drive most of GDP for the last several years, the reverse of the statement is also true. If we remove housing and real estate as fake and as bloated as it was...from the economy the house of cards has to correct.
Maybe citizens should have stood up when the NAFTA agreement was signed. Maybe Perot was right! Maybe it is not a good thing when Democrats and Republicans shake hands and say it is a good idea. Credit is an illusion, because sooner or later it has to be repaid.
Interesting article, but Paul misses the point that our banking system is insolvent and the country essentially bankrupt leading to an eventual collapse like in Iceland. It is not just the CDS that need to be elimated, but all debt needs to be repudiated and the banking/monetary system reestablished. It is not if, but just a matter of when something like this happens.
The alt-a third wave will probably be just as dramatic as the second (commercial) wave. The forth wave will be the crash of the banking system and its rebirth.
You are so right credit is an illusion because sooner or later it has to be repaid! Our issues cannot be solved with more easy credit. This kind of thinking will only prolong the inevitable and has shown us it doesn't work!
Jim,
The problem is because everyone thought by using other peoples money...that was the way to buy...now they can't pay it back so it killed the whole concept.
Phil I was listening to a statistician on CNBC yesterday. He was speaking about the financials...he pointed out there has never been a correction as sharp and as severe as what we are experiencing today. Not even in the 1930's. You're right. This is assuming they had assets instead of just government money.
Dorie Dillard: Canyon Creek & NW Austin Living (Coldwell Banker United) I agree. Over this past week, I received a few emails about NEHIMIAH, and yesterday I received a phone call requesting I contact my elected representatives about H.R. 600. Do we really need this again? From what I know these loans have a default ratio 3 X higher than regular FHA loans. Is anyone learning the lesson?
Neal Bloom-Realtor ® Assoc.-CRS-Weston FL (RE/MAX Premier Associates) It really makes you stop and think "Was the entire nation on drugs?" We went stupid on no money down real estate for a few years. What about the consequences?
Jim - This is probably very true. First the bubble was going to burst because home values shot up, then the sub-prime balloon popped when so many ARM's increased homeowner payments, then the credit crunch with the banks taking such a hit and adjusting to better lending practices and now the rash of lay-offs. When does it end. I don't know if anything else could possibly be left to effect this market. But, just when we think things are going to get better, it seems something else happens.
Jim, Our government is doing what John Meynard Keynes suggested to FDR - deficit spending to prime the economy. Unemployment was 25% in 1933 - it dropped all the way to 20% just before thestart of WWII. Keynesian's economic theory has never worked anywhere, because it is socialoistic and that never works - we need to restore confidence in our economy through restraint, Art
Another enlightening blog! Thinking we can spend our way out of this is what got us in this quick sand. We all need to blog, holler and spread the word before Congress, state and local government think this is what we want or need. The experts often are political hacks who are not the best people in the country for the job of getting the country squared away but who are owed big time for getting their leaders elected. These guys are on camera and mic 24/7 selling the idea of billions and billions being the medicine needed for the disease. It is time government lives within its means spending less than it earns and finding ways to make this country cheaper to live in, do business in . Individuals that learn to save again, and are saddled with LESS taxes because of more efficient government spending will have then have money for rainy days and better "impulse control" on their spending. Our kids are watching and learning from what we do or don't do. If you have less money, you manage it better, it becomes more precious and "needs" based buying kicks in over "want it right now" type purchasing. That is why affordable, attractive real estate will never go out of style. Practical smart capes, ranches not mcmansions are what the average taxpayer has to be content with...and getting it paid off easily with the low low rates out there now. These are the best of times if you prepared for them and there are some amazing real estate deals available unless you had an eat, drink and be merry attitude with your wallet. Plastic is too easy and think what Jimmy or Jane, your kids think as their little eyes watch the guy at Home Depot or Best Buy cut the card in half per instructions of the company backing it...and then Dad reaching in for another of a stack he has and plays like a deck of cards.
Hi Jim, I read this article myself. It comes as no big surprise that continued layoffs will worsen the foreclosure flood, the retail hits, and sales in every other industry. We have a long way to go to recovery.
Debi
Carol Culkin (Houlihan Lawrence Realty) Sometimes I feel very naive when I read something like this. It really is enligtening. I wonder how could I have not seen the bigger picture...
Art Kruschka - Fairfax Prince William Stafford County VA Real Estate Service (First Virginia Realty Management) I agree Art. Confidence must be restored.
Jim we are in a bind and their only solution is to spend more money and go further into debt. Won't work in my opinion.
Andrew Mooers | Northern Maine Real Estate / Aroostook County Broker (MOOERS REALTY) You brought up a load of great points. When I read your response, I agreed with everything your said, and also thought that these are good times. For those that have prepared, this is an opportunity. We know have to become more personally responsible than ever. We will be more challenges managing less, and appreciating the more important things in life.
Debi Boucher - Memories DVDs Slideshows "Real Estate Showcase" (Memories DVDs "Bring your Photos to Life!") So much is interconnected...I really feel betrayed by Congress that they hid this from the country until just before the election.
John Walters (7824 Real Estate of Louisiana) The sad thing it is proposed by the same persons that caused it in the first place. Has anyone noticed nothing is working? Banks are buying other banks, and still not lending. Many of the banks that received bailout monies refused to tell what they are spending it on, and many banks are giving political gifts to politicians wiht TARP money! This country has gone mad!
Jim, this country has gone mad.... There was an article in the newspaper indicating many TARP recipients have INCREASED the amount of money spent on Washington Lobbyists since receiving TARP monies (to try to get more money) !!!! Not only should these companies have been put through bankruptcy, but our country/congress is/has become morally bankrupt! It really is time for a March on Washington or a revolution. Still can't believe Pelosi gets a private "air force one" and doesn't have to fly commercial or better yet take greyhound so she can get to know her constituents!
Phil I read that also. TARP money is being used to lobby Congress! Yet no one is questioninig anything. There should be 10 million persons marches on Washington demanding investigations. Pelosi is a majro part of the problem. Americans are apethetic. I call my elected representatives on a regular basis. All of them!