Recession rebound — 2009 is already looking up?!

“It’s a recession when your neighbor loses his job; it’s depression when you lose yours.” – Harry S. Truman, April 13, 1958

The R word
The Feds are doing everything they can to get this economy out of recession as fast as possible in 2009.  They are putting faith back into the financial market.  They are committed to turning this economy around and by lowering rates and pumping stimulus money into the system they will make sure that housing prices will bottom in 2009.

Oh, a “bottom” you say?!  Yes, I do.  More numbers are coming out to confirm an earlier post I wrote where I talked about future supply problems for housing.  New homes built this year are at the same level we built in 1959 (when we only had a population of 179M people).  The US now has a population of 310M people, so if we’re only building homes at 1959 levels, you can imagine what that might mean.  Just wait, excess inventory will be consumed and house prices will once again rise due to lack of new homes being built.  It’s not going to happen over night, but it will happen sooner than you might think.

One side effect of the Feds rate reduction is that they will also make it so lucrative to be a bank lending money right now that it will become irresistible.  Banks need to lend money to make money and they will soon begin to see how profitable it is.  They can borrow from the Feds at 0.5% and lend out to borrowers at 5% — that’s a great business!

Stability will return.  We are not going to zero.  We are not falling apart.  Anyone borrowing money right now has gone through the toughest lending requirements we’ve seen in 10 years.  Their loans are great paper and very stable which means that whoever buys them in the secondary market won’t need to worry about the loan going bad.  Again, making the secondary market for mortgage-backed paper more stable.

Jim_Cramer_Mad_Money
I hope you are making smart choices right now and positioning yourself for the next big run of growth and prosperity.  I’ll leave you with a quote from one of the most entertaining guys on TV (Jim Cramer from Mad Money on CNBC) — “I command you to go out and buy a house in the next 3 months.” (December 16, 2008)

-mark

Bay Area House Prices Drop 25% . . . , Really?

I am about to post an article showing the monthly house price trends for the areas we cover.  As a follower of our blog, you can say that you’ve seen it here first because I can safely say that you will soon be reading a headline on local newspapers like this — “Bay Area House Prices Drop 25%”  (or something more dramatic that will catch your attention.)

Please don’t be fooled.  Yes, the headline will be “technically correct”; however, it does not mean that your house price is down 25% or that the price of every home in the Bay Area is down 25% from last year.  The fact is just that we have many more $500k homes being sold and fewer $1.5M homes being sold; therefore, the average sales price will look like it is down sharply.

That is what is happening now so don’t get nervous when you see the headline.

Buyers and investors are snapping up deals on foreclosures and short sales around the $400k – $600k range so our average sales price for the county will be trending down for quite a while. 

-mark

November Wine Friday: Red Table Wine

Since we knew there would be so many people tied up with friends or holiday travel we decided to just have a simple “Red Wine” theme this month.  I was very pleased to taste several Bordeaux blends with a lot of character and depth.  As always, the food was fantastic and a very nice reprieve from the Thanksgiving overload.  We hope everyone has a safe and special holiday season and look forward to seeing you again in January!

Here is the food and wine lineup:
Ham1
Ham2
 

MacaroniCheese
CurriedCouscousSalad

CrabMeatDeviledEggs
PumpkingBreadPudding

-    Old-Fashioned Ham with Brown Sugar and Mustard Glaze (Chef Candy did her special ham but I don't have her secret recipe; however, this recipe got good reviews)
-    Italian Macaroni and Cheese
-    Curried Couscous Salad with Dried Sweet Cranberries
-    Crab Meat & Celery Deviled Eggs
-    Pumpkin Bread Pudding

RedTableWine

2002 Estancia Meritage
2000 Mazzocco Matrix
2005 Murrieta’s Well Meritage