The Declining Market

Jobs are one of the major indicators of declining market.  In November 2008, payrolls took a deep dive as 533,000 jobs were cut.  Now that our unemployment is at 6.7% we are at all 15 year high.  According to Market Watch,

“It was only the fourth time in the past 58 years that payrolls had fallen by more than 500,000 in a month. Since the recession began 11 months ago, a total of 1.9 million jobs have been lost. Job losses in September and October were revised much lower.

Today’s guest post by Living Off Dividends & Passive Income who shares our views on the US economy and real estate markets.

According to Bloomberg.com;

Billionaire Sam Zell said the housing market could start recovering as early as next year and he’s focusing on investing in debt rather than equity.

“We believe that the opportunities, particularly in difficult situations, are in the debt,” said Zell, who made his fortune building the largest publicly traded office and apartment companies in the U.S. “We have been focused on, not only in real estate but in corporate, identifying debt situations where it is trading at a discount.”

There is no denying that our country has always faced financial problems based on our mentatility of borrowing versus saving…of consuming versus producing…of “printing money” when needed!  This issue has been compounded with the downturn of our real estate market and depreciating home values.  Our homes are the single largest asset (or should I say liability now) of many Americans.  With a decrease in this asset, spending is minimized and families cannot rely on their homes as an ATM machine anymore.  This issue is hitting home, not only as a country but individually.  A movie called I.O.U.S.A is being released this month that outlines not only our current financial conditions but the history that has led to where we are today from a debt perspective.  Below is the trailer:  

WCI Home Builders could not obtain the necessary funding to maitain a healthy cash flow.  With $2.18 billion in assets and $1.92 billion in debts WCI had to file for Chapter 11.   WCI Home builders focus on the luxary real estate market where most of its business is centered out of Florida (one the top states for declining real estate prices).   A week ago its stock went from 99c to 2c.  This is a far cry from the ~$20 it was trading for about a year ago.   This is yet another plea for help in our declining real estate market. 

Bush recently passed a housing law to try and “help” homes that are pending foreclosure. $300 billion is being given to the FHA to help refinance homes at a more affordable rate.  This is expected to be dispersed to over 400,000 households.  There are many other perks to this housing bill such as grants to fix up foreclosed homes and tax credits for first time home buyers.  Read the full article from the News & Observer.

With all the financial turmoil our economy is facing right now it is no surprise that there has already been 500 billion dollars in losses and asset write downs by our financial institutions.  According to Money Morning, this is forecasted to continue with an expected total of 1 TRILLION dollars in write downs! With so many people waiting on the sidelines to buy, it is not a far stretched theory.  Some feel that there is hope with the new bill that the US House of Representatives just passed:

According to MSN there are still areas that hold a potential profit if you decide to buy a house and hold it for some time in this market. Below is a table that forecasts out expected equity for homes in different cities (with the assumption that you hold on to it until 2012). Texas, New York and South Carolina seem to be the top winners with the most cities on the list. This is atlease a 4 year investment so don’t expect to flip and run…

How much equity you’d have by 2012 if you bought a low-priced home today…

Home prices fall in 100 major metro areas in the first half of 2008.

Median national home prices down 7.7% in Q1 to $196,300.

Biggest Losers:

• Sacramento, CA down 29.2%
• Riverside, CA down 27.7%
• Lansing,MI down 26.9%

Biggest Gainers:

• Binghamton, NY up 11.8%
• Peoria, IL up 10.4%
• Spartanburg, SC up 10.1%

See the full video from CNBC.

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If you are interested in contacting any of our Market Specialists for free counseling, email Customer Support or call at 1-800-881-1479

The Wall Street Jornal posted an article stating that we have hit a point where according to history it is time for the cycle to reverse.   The graph shows housing starts (per thousand) versus time (in years) in correlation to a recession.  Read the full story from the Wall Street Journal. 

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If you are interested in contacting any of our Market Specialists for free counseling, email Customer Support or call at 1-800-881-1479