Ridgewood Real Estate Blog : February 2009

Recession, Depression: Housing is to blame!

On February 26, 2009 President Obama submitted his proposed budget. Here are some excerpts from "A New Era of Responsibility"

 "We start 2009 in the midst of a crisis unlike any we have seen in our lifetimes. Our economy is in a deep recession that threatens to be deeper and longer than any since the Great Depression. More than three and a half million jobs were lost over the past 13 months, more jobs than at any time since World War II. ...This crisis is neither the result of a normal turn of the business cycle nor an accident of history. ... For decades, too many on Wall Street threw caution to the wind, chased profits with blind optimism and little regard for serious risks-and with even less regard for the public good. Lenders made loans without concern for whether borrowers could repay them. Inadequately informed of the risks and overwhelmed by fine print, many borrowers took on debt they could not really afford. ...This irresponsibility precipitated the interlocking housing and financial crises that triggered this recession."

Wow, you get the feeling that things really are bad. It is easy to blame Wall Street and Housing for our current situation. While it is clearly obvious that some people were misled, others purchased homes that they couldn't afford with their eyes wide open. The risky loan, the Adjustable Rate Mortgage (ARM) was part of the problem. However, there were many people who had this type of financing that didn't lose their home. As a matter of fact, they were able to finance a much more expensive home than they would have afforded with conventional financing. There were quite a few people that made money in the boom years simply by living in their home for two years and then selling it. As long as the market is in an upward swing the riskier financing wasn't that risky. Confidence in the Real Estate market became shaky and prices started to decline. Once that was the case, the markets had to adjust.

I respectfully disagree with the statement "This crisis is neither the result of a normal turn of the business cycle nor an accident of history". Real Estate is cyclical. Sir Isaac Newtown said, "What goes up must come down". Experience tells us that he was right. Were there people who took advantage of the system? The answer is a resounding yes! Trouble is that when things are good, most people aren't thinking about the inevitable rainy day. All markets are cyclical and history repeats itself. Clearly, when we don't pay attention to the mistakes of the past, we repeat them. The stock markets have had a few "crashes", 1929, 1987 and today. The Dow industrials are down over 40% in the past year. Even the worst estimates for Real Estate aren't a 40% decline over the past year.

My grandparents generation lived through the great depression. I remember as a child, my grandfather re-using tea bags and coffee grinds. They understood what it meant not to have things. They lived in a time period before the FDIC insured banks. My grandfather told stories of how there was a run on the banks when the stock market crashed. The banks didn't have the money to give back to the people who had deposited money in their bank. People lost their life savings and then the bank would go out of business. You can understand why my grandfather felt it was safer to save money in his mattress.

Today, the consensus is that the Real Estate market is down from the highs of just a few years ago. You don't have to have an MBA to figure that out. In this challenging market you need to go back to the basics. A well priced, well maintained and appealing home will still sell in the shortest period of time. This era in Real Estate is calling for more specialized services. Our world moves at the speed of light. We are in the information age. Embracing the newest technologies is essential to survive in this environment. A homeowner trying to sell today may be at a disadvantage because they are forced to compete against short sales and/or bank owned foreclosure properties. Whether your home is distressed or not, you can still sell in this market. Interest rates are near all-time lows and the government is giving nice incentives to first time homebuyers to enter the market. Don't be misled, not everyone thinks doom and gloom. There are many buyers in this market who are ready to purchase. I know, I am working with them every day. Real Estate is still the best investment. The last time I checked, they weren't making any more land.

 

Get Educated.  Get Empowered.

For more information on this or any other topic, call Sal Poliandro, Realtor, Marketing Advisor, Short Sale Specialist

ePRO, SRES at 201-259-2187, visit our websites: www.SalAndDawn.com or  www.shortsaleguy.org

Sal can be reached by snail mail at RE/MAX Properties 73 East Allendale Road Saddle River, NJ 07458

Get Educated.  Get Empowered.

For more information on this or any other topic, call Sal Poliandro, Broker Associate, Realtor, Marketing Advisor,

Short Sale Specialist and CDPE, Certified Distressed Property Expert

ePRO, SRES at 201-957-7650, visit our website: www.BCHomeTeam.com 

Follow me on Twitter: @salanddawn

Sal can be reached by snail mail at RE/MAX Properties 82 East Allendale Road  Suite 4B Saddle River, NJ 07458

Comment balloon 5 commentsSal Poliandro - Bergen County Realtor • February 27 2009 01:20AM
Recession, Depression: Housing is to blame!
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