Wednesday, September 24, 2008

"Prices must adjust to economic reality"

From the Stockton Record:

Doldrums - a sluggish state in which no development or improvement occurs - is the word for the California economy during the next 18 months to two years, according to the economic experts at the UCLA Anderson Forecast who released their quarterly report this morning. "We have a no-growth forecast for the next 12 months," University of California, Los Angeles, economist Jerry Nickelsburg said Tuesday....

Nickelsburg said Anderson Forecast economists have been regularly predicting an overall slowdown in the state's fortunes, but it's become "a little slower than we expected. We did not expect the problems to be as pervasive as they have turned out to be."
From the Contra Costa Times:
This current statewide slump began in late 2007 as a "mild recession," states a new report by the Stockton-based Business Forecasting Center at University of the Pacific. "The shallow but long downturn (in California) will extend into the spring of 2009 as the United States and much of the world joins the state in recession," the UOP report said.

The new problem that has emerged is the housing-related ailments that plague the economy throughout the state have begun to infect industry sectors other than real estate, said Jeffrey Michael, director of the UOP Business Forecasting Center. The first half of the downtown was housing-related. California is entering into the second half of its downturn as more industries tumble, Michael said.
From the Sacramento Bee:
For Becky Green, a single mom living with her grandparents, Jeff Young, a contractor without any houses to build, and Susan Case, who yearns to return to bartending, the Red Hawk Casino is an employment jackpot waiting to pay out. Monday, all three were among 500 people at the second day of the casino's job fair in El Dorado Hills seeking work as waiters and waitresses, housekeepers, slot technicians and other positions. So far, more than 14,000 people have applied for 1,750 jobs at the Shingle Springs Indian casino scheduled to open in December.
From the Manteca Bulletin:
The year-round education program at Manteca Unified will be history after this school year. Trustees Tuesday agreed to take the elementary sites in the Weston Ranch community off year round....

In the past, Manteca Unified found YRE necessary in Weston Ranch because schools were impacted from the staggering growth in the area. But much has changed since then. The area has witnessed a decline in student enrollment due in part to the high number of home foreclosures, in turn, forcing families to move away.
From Inman News:
In the Stockton, Calif., area, which has been a national foreclosure hotspot, Glenn M. Race of Prudential California Realty said that he has seen a slowdown in the response to buyers' offers for bank-owned properties (REOs) that have completed a foreclosure process. "It seems like (banks) are hedging their bets that the government will bail them out so they won't have to go through the sales process," he said.

And there are prospective buyers who "seem to be overwhelmed with the bad news and fear has temporarily paralyzed them into waiting. Many buyers have said, 'What's next? Let's hold off until we find out.' "
From the Merced Sun-Star:
The San Joaquin Valley may be the epicenter of the home mortgage meltdown, but regional lawmakers remain leery about the $700 billion bailout package now being crafted on Capitol Hill...The congressional caution largely tracks what the lawmakers have been hearing from residents. The trend is all in one direction. Democratic Sen. Dianne Feinstein said that "virtually all" of the 12,000 e-mails and telephone calls her office has received have come from people opposed to the White House bailout proposal.
From the Sacramento Bee:
[Republican Rep. Dan] Lungren said administration officials have convinced him that something must be done, but he added: "It bothers me very much - the idea that somehow we're capitalists when you're making money and we're socialists when we have losses."
...
Republican Rep. John Doolittle...says the federal government cannot afford to be "the automatic savior" for every U.S. company facing financial peril...Doolittle, of Roseville, joined 30 other House Republicans who sent a letter to Paulson and Federal Reserve Chairman Ben Bernanke, asking them to stop using federal funds to save private firms. While "no one wants to be the ones who says no to a fiscal rescue," they wrote, bailouts that delay short-term financial pain can ultimately cause much more damage to the economy in the long run.
Ron Paul on CNN:
When builders realize they have overbuilt and have too many houses to sell, too many apartments to rent, or too much commercial real estate to lease, they seek to recoup as much of their money as possible, even if it means lowering prices drastically. This lowering of prices brings the economy back into balance, equalizing supply and demand. This economic adjustment means, however that there are some winners -- in this case, those who can again find affordable housing without the need for creative mortgage products, and some losers -- builders and other sectors connected to real estate that suffer setbacks.

The government doesn't like this, however, and undertakes measures to keep prices artificially inflated. This was why the Great Depression was as long and drawn out in this country as it was. I am afraid that policymakers today have not learned the lesson that prices must adjust to economic reality.

7 comments:

Patient Renter said...

The area [Manteca] has witnessed a decline in student enrollment due in part to the high number of home foreclosures, in turn, forcing families to move away

I don't think that "forcing" is the right word here. A more appropriate phrase might have been "...giving them no reason to stick around Manteca any longer"

The government doesn't like this, however, and undertakes measures to keep prices artificially inflated.

Exactly! I hope this fact sinks in.

mopar777 said...

Have any of you heard about the bulk sales of REO to vulture funds that Mr. Mortgage has mentioned? They were supposed to start taking place right after the end of the spring/summer selling season.
I guess there just aren't enough suckers showing up at these fake reserve auctions anymore or they get the winning bid and can't finance.

Don't pay a whit of attention to the headlines people. It's going to be glass half full and market bottom talk for the next nine months by a local media promising to say anything in order to attract dwindling advertising dollars.

The banks are in the drivers seat now. They will determine when bottom comes.
And after the election the cry will be PRICE TO MARKET - comps be damned.

Jacob said...

Why sell to a vulture fund for pennies on the dollar when you might be able to sell to the government for the full price.

Banks are waiting to see what the bailout will be.

anon1137 said...

The proliferation of casinos is another symptom of our sick economy and twisted values. Everyone is looking for the big kill, even old people, who presumably have lived long enough to know better. So they deduct social security taxes from our paychecks, a couple days later they mail it out to the old folks and the fat folks (disability), and a couple days later the old and fat folks get on a bus and head for the casinos.

Does anyone know what happened to the DQ stats by zip code for August? Doesn't look like the Bee posted them, either in their lead story, on the charts page, or on Wasserman's blog.

Cow_tipping said...

Adjust to econimic reality ...
Would that be the no real or even fake jobs reality or the reality that sacramento was a nice farming town, before the idiotic RE circuc drove out the true farmers and built ugly as sheite crap in place of the farms by the million and no one wants to touch it with a 10 foot pole ...
I dreamt of buying a few acres in the galt area with an old farm house and living there and growing tomatoes and apples ...
Cool.
Cow_tipping.

Cmyst said...

No one is ever going to go broke by selling alcohol, sex or gambling. They are recession proof.

mopar777 said...

cmyst, you are a genius. I believe Tony Soprano said the same thing once.