After reading about the collapse of two of Wall Street's most venerable firms (Lehman Brothers bankruptcy and Merrill Lynch's takeover by Bank of America) followed by the Dow being instantly down over 300 points, you have to wonder what's next. It's becoming obvious to everyone that this economic meltdown that started in the housing industry is going to go on a while longer.
The first thought is that mortgage interest rates may improve as investors seek the safety of bonds. This, as we know, really hasn't happened as it should (lenders are building in risk in their pricing) and I'm not sure it will now. Mortgage interest rates came down to 5.5% on a 30 year fixed O.A.C. recently which is pretty good. And with the Presidential election a mere 7 weeks away, I don't expect much movement on rates. There is a tremendous amount of uncertainty these days and only time will correct it.
I expect some time next year for our market to start improving. There are pockets of the country right now that are starting to recover. The bottom line is the consumer needs to return to the marketplace. And he/she needs to feel better about the economy before buying homes, cars, boats, etc. I think once a person gets comfortable with their own situation (it's funny how Presidential elections are always based on the economy in the end), we'll see better times.
All is not doom and gloom. I just think everyone is running a little scared. With our financial institutions in so much trouble, expect the next year or so to have more turmoil. But after this, we'll have a nice recovery. For those of us in the real estate industry, hang in there and keep reminding yourself people are always buying real estate. Have a great day!
Paul
Paul McFadden
What a wild rollercoaster ride this whole thing ends. Hoepfully things will bottom out soon.
Nice perspective and we should all keep it in perspective.. you are correct in that Real Estate is always selling.. people move due to job changes, sickness or health and a myriad of other reasons.
I think that AIG is restructuring is worse. As far as mortgage rates go, this is good news for those looking to refinance or purchase a new home.
All these moves are ending with actions to provide stability, we dont have a rush to the vault melt down and an economy such as ours will create its own solutions to the problems
Paul, The economy does appear to be on shakey ground. Hopefully, things will get better soon than later.
Did it really start with the real estate industry? Or is that what the "experts" would have us believe?
Let's take a look at some history. In the 90's Internet stocks went crazy. People made a killing in companies that did not pay a dividend. Insane. When the bubble burst, people started to look elsewhere. Real Estate was just one of those avenues. Now no matter what you priced your house at, it sold. And to make matters worse, the people who bought it made a killing. Now move forward to the early 2000's. The bubble started to burst around 2005. It moves up and down. Some areas not hit as hard as others. What does that tell us? It's not "The Market". It's the crazy press. All you hear is the economy is busted. Blame Bush. Some people really think we are in a depression. I'm not saying we don't have problems now and my head is not in the sand but, we are not going to hell in a hand-basket. We had problems before and we did alright. Remember the past. We can do it again. So, it's a lot more than just the Real Estate industry. Just my two cents worth.
I have a friend who is all woeful and very 'glass half empty'. He often forwards me links to CNN Money articles, probably because I think most of those are all doom and gloom / chicken little writings which in the end do everything possible to put a political spin and point fingers of blame instead of engaging in constructive conversation on what can be done to improve matters. He knows I put little stock in CNN Money.
So I just get a call from him and in no time the subject of Lehman Brothers comes up. I let him vent and rant. Then I ask him... "So, how's your health?" to which he says that it's great. I remind him how great that really is. Money is powerful, but good health is a true blessing.
"All is well...do not flee...wait until we have negotiated!" Remember that part of the movie Braveheart? Stocks will rebound (with no technical data supporting it), and then Chase will buy WAMU with the gov allowing them to not honor WAMU's bond debt...much like the special deal that Bank of American got with Countryfried. We are pawns.
Well Paul, where do you want to start?
UBS
Morgan Stanley
Goldman Sachs
and a handful of other smaller international investment banking firms
and about 8,500 banks worldwide with the top 100 teetering and very unstable as a group.
Unfortunately, this is just the beginning. The hope and fear is that they do not drag the entire financial system down with them.....hang on my friend!
Thanks
Bo
A very thoughtful post -- thanks for sharing this reasoned report.
You are very welcome! I'm glad I could be of service.
Bo: I think we will weather this latest storm. After all, it's been going on for over a year now and eventually it will pass.
Rich: Thanks. We may be pawns but we're still mighty!
Rob and Jeannie: I completely agree with you. Life is short; we may as well be healthy and enjoy it.
Kenneth: It appears the latest downturn did start with the zero down loans, etc. Yes, everyone bought in and there's a ton of blame to throw around. The bottom line is every 10 years we have some economic challenge followed by a fairly swift recovery. That's what will happen this time. Expect things to start picking up again 6-12 months hence.
Jimmy: Thanks for your positive thoughts. They are appreciated!
James: Spoken like a true free market guy. I love it! The correction when it comes will be a good one for all us concerned.
Michael: I'm not as up-to-date with AIG restructuring and what that means. But I do believe that we're near the bottom and about ready to head up. Keep your fingers crossed!
Gail: Thank you. I appreciate it. As long we keep our eye on the ball, good things happen. Have a great day!
Rob: From what I understand, some parts of the country, including yours, are starting to show signs of a real estate recovery. up here I expect ours sometime next year. Have a nice day!
Thanks for all your comments. Interesting stuff, huh?
Paul
Great people commenting to a great post.
Kenneth: That's high praise coming from you! Take care.
Paul