Wednesday, August 5, 2009

In the trenches look at the current Market

The 8k stimulus at first appeared to be doing just what is was supposed to do. I was so busy running as fast as I could to sell as many houses as I could while the going was good. I don't feel like the stimulus has done what it set out to do. It was a quick flash in the pan stimulus. The market has settled back down. Homes are still selling but the hot market is anything under 140k. If your home is priced above 140k it has to be the best on the market in its price range, or have some other outside factor like special location,amenities,design etc.The problem is the stimulus was supposed to trickle up. Get the rest of the market moving. It has in some respect but not enough and not enough to take off on its own. The lending environment is tightening. Commercial loans are almost extinct. The seller has to be giving away a golden goose for the bank to lend on it and if they do lend on it, It won't be on very good terms. You will also need a very large down payment. Cash is king in the commercial sector. The problem is the sellers still don't realize just how hard it is to finance a commercial property right now. There are several great loans out there for first time home buyers. If a buyer has good credit and verifiable income they can even qualify for a few zero down programs. Yes that's right zero down is still out there for a chosen few who have stellar credit and very verifiable income.

I think as the lending market tightens it is going to get uglier out here. City revenues are down 30% because of lower property values and lost income tax. Cities are looking for money and trying to shake you down for taxes even if you don't owe it. I have had this happen so far myself. I recently moved my office to Lakewood from Rocky River. Lakewood is trying to get me to pay taxes for 2008. My office didn't move until 2009. My accountant has written three letters so far. They came up with some figure of what I owe. I have no idea where they came up with this number! My accountant said they are going after everyone trying to shake as much money out of people as they can. This tells me we are in for a very hostile few years with the government. I have always taught my children that you should always pay your taxes. The government is the worst entity to owe money to. The government can go into your bank account and take your money. It can freeze your assets and garnish wages. You are better off owing the local loan shark than our government.

Now we are stimulating the car industry with cash for clunkers. I fear it will be the same thing a false economic growth. There are reports out there about the market getting better. These reports are from sales that happened two months ago. In two months we will see it all fell back down again. Now this car thing will be the same. The good part is everyone in that industry will get a reprieve like we did in the real estate industry. I was able to pay off a lot of debt from the last good run. So hopefully the people who are connected to the car industry can do the same.I am thankful for the last band aid in the real estate industry. Most of us were on the brink! I don't believe that these give aways are going to save us. We need some real industry with jobs attached to get the economy moving. Until we start putting people to work all the fake money give aways won't do anything more than a band aid affect. I hope that this electric car thing will help in creating a industry that can help add jobs and create a product that is in need and easily marketable. If they keep the price point where they say they will it should do just that. It is almost like Ford and the assembly lines all over again. The idea of making the car more affordable. Between insurance and gas onwing a car has become just a dream to a lot of hard working people out there. My son gave up a car (well they took it because of parking tickets downtown) 3 years ago. He rides his bike 7 miles to work and 7 miles home. I worry about him because he works downtown late into the night. He is saving for a car and and has hope to own one by next year.