Bernanke Tries to Decide What Next

The stock market volatile – imagine my surprise – but a recently headlined article on Marketwatch.com reminds us that consumers think it’s going to get worse.  Of course consumers think it’s going to get worse – the media keeps telling us it is going to get worse.  Even good news is buffered by some footnote as to why this is an exception to the bad that’s yet to come.  And if the media tells enough people, and talks about it long enough, eventually the American public begins to believe.  After all, if it can work for presidential candidates like John McCain…

So is the economy bad?  Yes, it’s terrible.  This is the worst thing that could have happened to America at the worst time.  It’s caused market upheaval around the world and some analysts think that it would be worse right now if we knew what to look for.  Fortunately, or not, depending on your view, the Wall Street shenanigans are as difficult to unravel as they were successful in their profiteering during the good times.  But, the media is missing something very important – we, as people and as a country, will recover.  And if history serves as a measuring stick, we will recover relatively quickly.

The good news is everywhere, too.  Gas prices are falling.  Homes are selling.  Interest rates, for those people that can qualify to get them, are historically low and overall it’s a great time to invest in real estate. If you don’t listen to the media.  If you listen to media you may as well put your head in the sand and call it done.

The media is talking about doom and gloom in the credit markets, extensive foreclosures and saying that home prices have dropped to the point where Americans can no longer afford to sell.  But, depending on how you look at things, the numbers might tell a different story.

Average home prices (based on sales) have fallen in the past few years, but not necessarily because the average American is selling their home for less.  It’s all tied together – home prices are falling because there have been more foreclosures and the banks need to sell these homes.  They need to get the properties off their books and into the hands of a homeowner.  They don’t have pride of ownership.  They don’t have a bottom price.  They don’t have any reason to try and maintain the market.  They are a business with an asset that they want to turn into a liquid asset – it’s that simple.  Banks need cash – not a place to live.

Now, is this bad?  Yes, it’s terrible, but it’s also consistent with curves that we’ve seen in the past and home values will return.  Adjusted for inflation it’s still a significantly better investment (looking at today’s market position) then the same investment in something like the S&P 500, not to mention that for most Americans it’s a leveraged investment that returns dividend in the form of a tax savings and a place to live.  No other investment out there can touch real estate over a long period of time – so I say it’s a great time to buy, and I think the media needs to start looking at the real pictures.  Present the facts, not the glorified grief that you’ve been handing out.

Ranter