Guess What! Somebody Sold a House!

For the first time in a year there is some motion in the real estate market around here. Of the seven houses (out of about thirty) that have been for sale in the new development across from my house, two have sold in the past week or so.
Nice houses on decently sized lots. Central air, good amenities, both with four usable bedrooms, one built two years ago, the other five years ago. The smaller, five years old, went for exactly what the owner owed on it (I don’t know if the sale was plus fees or not).
He had moved to another city and was paying double mortgages—so he cut it down to exactly what he needed to have. Forget profit, he was happy to be out from under. I don’t think he was planning on this outcome when he bought in 2005.
The other guy—larger house, bigger lot, three stall garage—just needed to get out from under a pile of debt. He had to take a loss on his house—the bank agreed to accept an amount less than the face value of his loan. I guess they considered that a better deal than sitting on another empty house.
This, in a desirable neighborhood—one of the better school districts, about three miles from a super store, less than two miles from the highway that takes you quickly to Grand Rapids, Chicago, Detroit, Lansing or a dozen coastal towns.
But there are still five other houses for sale in that subdivision. These are people who need or want out but can afford to sit—for now—until the long prophesized real estate recovery happens. I noticed that at least one of the “For Sale” signs is getting a little battered by now.
Motion. Not the kind of motion that increases the value of the family estate, but it’s motion. After a year of nothing. It fits with what I am reading in the various business reports I see. We have probably hit bottom for now.
New job losses are declining. There is an actual (if teensy) uptick in home building. People are turning in their clunkers like mad to buy new cars for thousands of dollars off. Business profits are up—even as actual sales volumes are way down.
Companies have laid so many people off that they can make profit on sales at 75% of year-ago levels. Those profits make Wall Street happy. The DOW has climbed a couple of thousand points to be over 9000 these days. That makes Wall Street happy, too.
(I have to say again what I’ve said before about Wall Street—it has been for the past several years, and is now, very close to a Ponzi-like scheme. Business and government have said to millions of Americans, “No more pension—here’s your chance to invest and make your own retirement.”
So every week or month, Joe Q. American finds himself with dollars to invest in order to give himself some sort of retirement security. He really has no place to go but the stock market. So every week or month, millions of more dollars are pumped into the market.
Inflow like this is going to make indices like the DOW go up—whether there is value there or not. This reality keeps me from being terribly impressed when someone says, “Look, the market just went up six percent in the past three months. Wow!”)
Banks have not really opened their coffers to start lending. They are continuing to loan on previously granted lines of credit, but they have not seriously begun to offer new credit. (They are continuing to slash borrowing limits on individual credit cards, too.)
From the founding of this republic, economic growth has required the availability of credit. As new household devices like washing machines and refrigerators came on the market during the Twentieth Century, new kinds of consumer credit grew along with them—or we would not have such devices in every house and huge companies to make them.
Without credit, neither business nor consumer spending is going to grow all that much. Without credit and company growth there won’t be a lot of hiring going on. All of which, the pundits are suggesting, will mean an anemic kind of recovery even if we are at the bottom of the recession.
Already people are starting to suggest that as we come out of this one, we are going to find developing nations like China, India and Brazil to be full size economic giants. They, not the US consumer this time, may lead the way up and out.
That’ll give us a lot less clout in the international markets. The dollar isn’t out of rough water, either. The Chinese, who hold billions and billions of them, are very worried about our deficits and the stability of the dollar. They are starting to preach at us—from a position of strength.
No matter what finally happens, we will emerge from this dust up into a very different world—one we, who grew up in the era of American omnipotence, can hardly imagine.
As to the recession itself, probably all we can really say is what Churchill said to Stalin after El Alamein and Stalingrad, “This is not the end. This is not even the beginning of the end. But it is the end of the beginning.”
If it’s that. Let’s pray it is.