Friday, November 28, 2008

A Week for Giving Thanks

At a time when "unprecedented" is being used to describe numerous economic events, an $800 Billion stimulus package was announced this week. The intent is clear enough: to encourage spending on new mortgages with interest rate reductions, and easing the terms by which Americans can incur more consumer debt. There is something curious to me about the premise. Interest rates were already quite attractive, hovering around 6% when historically the number to beat was 7%. In working with first-time buyers in particular, I see the dramatic differences between those who have been able to save money, and hence have had the 20% down payment required in this newly conservative lending environment, vs. those who have been unable to save.

Encouraging additional spending is clearly what economists feel is required at this juncture to reenergize an economy traumatized by huge swings in major indicators. We’ve grown eerily accustomed to the stock market being either up or down several hundred points each day, oil prices that were in "unprecedented" territory falling to half those amounts within a few months, foreclosures dominating sales in many areas and unemployment at levels not seen for decades. The intensity of the news and the volatility of major indicators are truly enough to have all of us on edge, uncertain, cautious.

I would love to assist buyers in purchasing homes in our wonderful East Bay area with its continued strength. So while I would normally welcome measures that would make it easier for buyers to enter our housing market, I can't help but feel that this latest measure, including $200 Billion set aside to make it easier for consumers to get further into debt with credit cards, is contrary to the best long-term interests of families as well as the over-all economy.

Some of those would-be buyers are convinced that our housing market will devalue further, and are unwilling to enter it until prices even in Berkeley, Rockridge and Albany are in bargain territory. It almost seems that some of these folks must be sure that the seller is experiencing pain before they are willing to buy. So far no precipitous drop in sales prices has occurred, and without that mythical crystal ball no one knows for sure if it will. My personal belief is that we may see a bit more softening, reflecting itself primarily in homes taking longer to sell. My guess is that we'll see much more optimism in our housing market after the inauguration. Bargain hunters might want to take advantage of these last months of a lame-duck administration and seasonal slowness mixed with the likely interest rate advantages from these latest stimulus attempts.

I'm currently in contract with buyers who wanted to establish a home together and were actively looking over the past few months. They know there is some risk that the value of their new home could go down soon after they purchase, but they are confident in the long-term stability of this area. They are looking forward to painting the walls something other than white, and planning a garage conversion to add space when they eventually have children. In this week of Thanksgiving I thank them for injecting some optimism in my daily experience. I thank them for being clear that buying a home is something quite different from buying stocks, and that while it is an important financial commitment, the emotional commitment is just as important, if not more.

So while this year has already brought us economic upheaval unseen since the Great Depression, even as we enter into the Not-so-great Recession we still have much for which to be thankful. We do see foreclosures in our area, but still in small numbers, especially as compared to some neighboring counties where the majority of properties are foreclosures or short sales. We live in an area of intense natural and architectural beauty. We are surrounded by an endless variety of delicious items. The life of the mind is active here. And let us not forget, even as the sun forces its way through the fog, it sets behind the Golden Gate, in this area that trully is paradise.

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