In times of confusion, we need strong leaders who can guide us through our trouble. The economy may not be in a recession, but we are in a bear market, where investors are reacting to rumors quickly. The problems with Fannie Mae’s and Freddie Mac’s stock is enough demonstration of that fact. We have news out of Detroit of the damage inflicted by the mortgage crisis to their neighborhoods. Today the news is filled with a release from a firm studying the foreclosure rate in California, which states that it is increasing in that state.
If you look close enough, you can even find that good news may not be so good. Over the past month, various publications having been placing Texas cities in the top ten of their lists of being a good place to live. Part of this has been due to positive economic news about this region. However, the Federal Reserve Bank of Dallas announced that even with growth in specific sectors (technology and energy) that growth is slowing in the area overall.
Into all of this, we have the Treasury Secretary providing an interview to BusinessWeek. With fairly consistent and detailed accounts of our economic distress, Paulson chooses to make a statement that he believes housing will turn around in a relatively short time. He gives no reason for this belief. He also makes it clear that he has not liked certain aspects of ways things were handled, but he can only deal with the present. He indicates that he has no vision, nor does he seem to know what may be happening.
We have to face the fact that the real estate market is not going to make a quick recovery. There are adjustable rate mortgages which have not reset yet. With the cost of living increasing, I believe that we could assume that more foreclosures are to come. For the duration of the bear market, there will be cash flow problems for businesses and families. This means that loans will be harder to obtain, even for consumers with good credit. If they cannot receive a home loan, how will home purchases stop their slide? I just see these conditions ending in a few months.
Real estate will weather this storm, and it is possible for consumers to buy homes. We are simply in a situation where wise decisions have to be made. We also need a wise leader in a time like this. Hopefully the next president will place leaders in place to give us a plan to move ahead, while correcting the problems which led to our troubles.