By Mike Colpitts
All economic downturns have their own identifiers. Mega-sized government bailouts are intended to produce a return of powerful market forces, and this economic recession has more than a large chance of turning into an economic depression. But for all of its failures this current financial crisis is taking on its own powerful personality that may not send the national economy into a depression, but instead produce another real estate boom.
Americans have become self-centered and investors or many of those who have bought real estate over the last decade as a way to turn a profit have become greedy with the concept of turning profits almost overnight. The flippers and all of the TV shows that track them lend to instantaneous gratification. This “greed factor” may also be what produces the most massive step out of this financial crisis.
The largest government bailouts ever seen are far from being immune to market forces. The New York Stock Exchange is on an eight week upward bounce. It’s why financial stocks, the worst battered in the industry have rebounded from their massive plunges. And it’s also why with nearly record low mortgage rates, pent up buyer demand and lower prices real estate is rebounding in the hardest hit marketsnot to say prices are rising. They are still falling in the majority of markets. It also doesn’t mean this will be a long lasting boom or one that has legs.
However, it does indicate that a boom of sorts is beginning to materialize in some areas of the country that could transform into another real estate boom of larger proportions. After all investors with all their worldly wisdom are generally greedysometimes they win, sometimes they lose.
The most educated and inundated of government participants are making statements that are hardly ever heard. Recall former Treasury Secretary Henry Paulson telling Congress we were on the edge of a financial meltdown in getting lawmakers to approve the first $700-billion bail-out. Sheila Baird, the head of the FDIC saying that the notion of businesses being “Too Big to Fail” is a 25 year old concept that should be tossed out with the garbage. And yes from President Obama a list of threatening statements about the nation’s economy as the worry rages on and out to Main Street.
As the drama unfolds more potential home buyers are making inquiries to real estate agents in California, which has been on nearly a year long increase in sales. Most of the homes and condos that are selling or at least 6 out of 10 are foreclosures or short sales, in which the bank agrees to take a lower price than what is owed on the property. In Florida it’s the same case and the worst battered of perhaps all markets, Las Vegas is seeing more sales than in years. There’s evidence to support a change in the dynamics of the housing market.
Maybe the government won’t have to spend the nearly $15-trillion (That’s no typo) they’ve committed so far.