Most people will agree that the lack of truthful information is just as bad as getting wrong information. If you watch the news programs on TV or read a few lines in the business section of local papers around the country one might think we are moving out from the depths of the current economic downturn and everything is about to be all rosy again. Of course, if you are one of the millions of Americans that are unemployed then the outlook is not so nice. Current figures reflect unemployment at 9.5% and underemployed at 16.5% and many will argue that these numbers are being misreported and are much higher.

 

What should we think about all the happy talk out of Washington on how the economy is recovering strongly, and how good times are on there way? Well keep in mind that these are the same people who told us the credit crisis was contained to the subprime sector. They are same talking heads who had no idea we were even in a crisis until it was nearly too late. Meanwhile in the first quarter of this year the delinquency rate on 45 million US mortgages climbed to a record 9.12 percent. In every category of mortgages, including prime fixed-rate loans (the “safest” in the business) late payments increased significantly. Credit losses and delinquencies are rising to new records in every sector including home equity lines, credit cards, auto loans, and corporate loans. It is abundantly obvious that those in charge were dead wrong about the size and scope of the credit market as well as the impact it will continue have on the economy! I guess this is why the same folks that said “it’s all turning around” are now floating the idea of another stimulus.

To be optimistic and to choose to see the glass as half full is a wonderful way to live life. However, when optimism is used as a means of control, which is exactly what the mass media and many in government are attempting to perpetrate on the American people, then it is disgraceful. Our leaders apparently think that we are all better off simply placing our head in the sand, believing what we are told and letting the good Sheppard lead us to the promise land even if that means the Sheppard runs the sheep right off a cliff.

 

What we have been witnessing over the last several months is a massive effort by our elected officials to make everything seem just fine when in reality we are still deep in the woods. While there is no question that the American people will ultimately rise out of this financial tsunami it is clear we have a long way to go before we are in calm seas.

 

Before anyone can make wise decisions, he/she must be armed with the truth. Many people were told in 05, 06 that real estate would never go down. In 2007, the National Association of Realtors even predicted we were at the bottom of the market and that it was a great time to buy. Worse yet, few knew the house of cards the mortgage industry was built upon and how easily it would crumble. (Nearly 80% of US mortgages issued in recent years to subprime borrowers were adjustable-rate mortgages – many of which have not yet reset). Because of the flood of misinformation, many people today find themselves buried their home. The financial and psychological impact of which is devastating not only to the individual/family, but also to the community. Meanwhile, we have witnessed the collapse of companies such as Merrill Lynch, Lehman Brothers, and Bear Stearns not to mention GM and Chrysler all of whom made it through the great depression. Where were our policy makers when this debacle was transpiring?

 

As for our local real estate market, with prices at or below 2001 values, clearly many buyers feel that it is a great time to buy. Since May of 09, we have witnessed a buying frenzy for properties at the price point of 250k and lower. As footnote, the current level of buying (equal to 05 levels) is once again proof that capitalism works. This resurgence in home buying is very encouraging and suggests that we have found the bottom. However, as anyone who purchased or refinanced a home in the last 6 years will tell you - we have a long way to go. Therefore, while we should appreciate the newfound exuberance in the market, we must also remain mindful of the deeper realities of our current economic environment and use those facts as the foundation for our decisions.

 

Today’s economic climate requires all of us to dig deeper into the reality of the situation while diligently shifting through the propaganda bestowed from those in the Ivory Tower. As history has repeatedly shown, people not governments rise above tough times. Being resilient and innovative is what being an American is all about and when we make it through this crisis, it will be because enough people woke up to the realization that they were lions not sheep.

 

 

Sincerely,

 

Robert Holt and Phil Mills of The [HOLT] Group, RE/MAX Sonoran Hills