2009 Thoughts On Economy

I have spent the last week putting together my business plan for 2009 and I wanted to share some thoughts on the economy. Now obviously selling homes for a living, the economy is of paramount importance. So I have researched and thought a lot about where it’s going in the 2009.


First of all things are not as bad as the media would have us believe. Most everyone I talk to says the same thing. Sure things have gotten harder for most people but not near as bad as what you hear on TV or read in the paper, not around DC at least. If you have ever been directly involved with the media regarding a major story like I have, you know how often they get the details wrong. When it comes to real estate matters they almost always lag three to six months behind what is actually going on. Having spent over twenty years in sales most of the motivational speakers and my old boss suggest in times like this not to watch or read the news at all. While I don’t think that is the answer I certainly take the media with a large grain of salt.

Most people have heard that DC is recession proof. This is because of the large number of government jobs and a diverse economic base. Thank goodness we all don’t rely on one large auto factory for our economic health or things would be really scary. At GMU’s Center For Regional Analysis they report that in Northern Virginia 34000 jobs where added in 2008. I’ll bet most were in the first quarter. Their web site is: http://www.cra-gmu.org/forecasts.htm, it is a great resource for raw statistics for the region. Jobs are always a driving force in an economic recovery. While we are not recession proof we are definitely recession resistant.

There is still plenty of cheap money to be borrowed. For a short while there was not but the feds are making sure the credit markets stay fluid. My lease expired on my car and I had to buy a new one last month. I thought having started a new business in the spring and thus being a self-employed Real Estate Broker that I may have had to jump through hoops to get a loan. But no, I just signed and off I went with no money down and no proof of income. Now getting a mortgage is more difficult than in the past but my clients are getting loans with 3% down and the closing cost paid by the seller. They are required to prove their income but some did not have perfect credit. Interest rates are about as low as they can go.

The last thing is the price of gas. When gas price starting climbing above three dollars a gallon it acted like an emergency brake on the ability of the economy to move forward. Consumers had much less cash in their pocket for discretionary spending and in the spring it seemed high gas prices had a choke hold on our extra cash. Then in the summer we received a huge break. China stopped subsidizing the price of gas for their masses. That’s correct, the Chinese government in an effort to keep the price of gas affordable was subsidizing the price. They stopped and the price of crude plummeted and so have our prices at the pump. Not to mention, the US dollar has rebounded in the world financial markets and we pay for our foreign oil in dollars. So if the value of the dollar goes up the price of gas goes down. It’s funny how the media does not comment on this very much.

I see 2009 as being a transitional year back to better economic times. I believe that the diverse DC economy will rebound before the rest of the US as it has in the last several recessions. With the help of the US government intervention providing low interest rates and falling gas prices the nation will follow suit soon after.

What are your thoughts on the economy and what I’ve written?

 

Boom and Bust is normal. Doom and gloom spread by the media tend to make people fear things more than they would. Sensible people understand this and don't let it get to them.

It was too crazy not to follow a tech boom and bust and not realize that the housing boom would do the same. There were a few voices in the crowd who understood what was happening...long before everyone else caught up.

Transitional is a good term to utilize for 2009 and going forward. We have a deep mess to dig out of. We have the ability to do so. It will be sometimes painful, but hopefully lessons will be taken from this episode in our history.

 

Excellent Brassy!

 

One of the bigger issues the media feeds is the idea that it's all gloom and doom. As a result, people stop spending which in turns slows the economy even more. This is why we have restaurants closing in this area even though people aren't losing their jobs. People stop spending even though their income and bills haven't changed. This has as big an impact on the housing market as anything else. I hate the fact that people panic and can't rationally look at their own situation, but believe everything they see on the news.

We're refinancing and just got our appraisal back. Our home is now worth $40,000 more than we paid for it. Two and a half years ago it was worth about $275,000 more. That was overinflated, but I think current prices are too low. That too will change.

 

+10 bazillion! (Although I know of many families where the major bread winner has lost their job.)

And it is not just restaurants that are closing around here. It is really tough for local retailers, too. I also believe that consumers should recognize the power in shopping local, independent small businesses. They are what gives our community character. Plus, they use the local resources and local small businesses: local accountants, graphic designers, printers, IT guys, consultants, attorneys, bankers, and the list goes on. That money is put directly back into our local community. And big box stores, and owner absentee chains take their money elsewhere.