So, What's Next?

As we all wait for the big "bailout" decision on whether the markets are going to come tumbling down - or if life is going to be filled with nothing but sunny days ahead (I suppose that won't help global warming) - people keep asking me, "What is this going to mean for the real estate business?" My answer is generally something like: "I don't know." But secretly I find myself thinking more like: "I don't really care!"

It's not that I don't care about the economy being strong and people being able to afford houses and other necessities; I'm in that same bunch of people, and my income is certainly dependent on home buyers being able to get loans. But it seems that every time the government tries to fix something, they make something else worse.

Now, as I've said before, I'm not an economist. I really don't know how all this works. But I've been in the real estate business for a long time, and from what I remember the economy seemed a little more stable when interest rates were a few points higher. It might not have been quite as easy for home buyers or for businesses to borrow money, but they also may have been a little more cautious when they did do it.

As the Fed has gotten more involved in easing the availability of credit to give the impression of strong economic growth, we have seen a run-up in real estate values like never before. I have been of the opinion for quite a few years that there was no way to sustain this "false real estate market" that was built on "feel good" interest rates. So, I believe that we got what we paid for...or, perhaps, what we didn't pay for!

Sellers also bought into this feel good atmosphere by thinking that these good times were never going to end. Those who used to be happy with 5% appreciation on their homes each year later decided that even 20% yearly appreciation wasn't enough, because money was cheap and everyone wanted more real estate. Home prices got out of hand, and the ocean of buyers turned into a wading pool.

This is the part of a Free Market Economy that is still totally free. Buyers are free to buy; sellers are free to sell; and real estate prices are free to fluctuate based on supply and demand - without government interference. And that is what they have done...coming down to levels we have not seen in several years.

So let's let the chips fall where they may, and maybe we can all get back to normal again. Whatever that may be!

I'm guessing there will be some kind of bailout plan that gets approved fairly soon, and some of those big exec's will only get 10 or 20 million dollars instead of 50 million for their severance packages. And with savings like that, it should only take about 20 or 30 thousand of those kind of salary reductions to make up the 700 billion dollars we need. Or, they could just get 70 million of us little guys to throw in $10,000 each.

I guess they should have called me in on that big meeting at the White House yesterday.

Dan