A Summary of Factors Influencing the Housing and Finance Industry
TRUTH IS A SCARCE COMMODITY:The real reason for the first-ever press conference by the Fed following a FOMC meeting is that when things start to unravel, the powers that be get up in front of the public and assure everyone that everything is going as planned. Bernanke’s strange appearance was an example of this. In his words, he told us how everything was working out perfectly and made clear that the Federal Reserve was not responsible for any of the problems upsetting the public, including higher gasoline prices or a weaker dollar.
The U.S. Stock market was happy, but the Fed Chair’s comments were far from honest and the precious metals and currency markets did not buy all the happy news. U.S. inflation is on the rise, due primarily to the Fed’s successful efforts at starting to debase the U.S. dollar. It is the dollar’s weakness that primarily has driven oil prices higher, more so than political tension in the Middle East and North Africa or Mr. Bernanke’s suggestions of surging global oil demand. As a result of Fed activity, the U.S. dollar has lost its safe-haven status and is hitting all-time lows against a number of major currencies.
It is my opinion that the dollar should be the real focus. Our economy is shrinking in the wake of higher energy costs. As the dollar comes under increasing pressure that drives the cost of energy even higher, it will de-value even more. I believe that when the real wrangling about the debt ceiling gets underway and the global financial community gets spooked, it will be the dollar that will lead the charge downhill. Once Uncle Sam publically admits that he is not willing to stand behind his word, he will be labeled “fiscally irresponsible” and the world will look for a safe haven elsewhere. This is a TIME-BOMB!
The fate of the dollar is only one factor in the equation right now; we have much more to worry about. We are in a “Catch-22.” Congress has its credibility at stake. It cannot allow the government to default, but the agreement to raise the debt limit may harm the economy just as much as raising rates because of a default. It’s possible that Congress will require major cuts in spending to get an agreement. That austerity program will reduce the amount of money the government spends which will lead to a deeper recession.
So on the one hand we have the prospects of higher interest rates if we don’t raise the debt ceiling, and on the other hand we have the harm to the economy that spending cuts will create. It’s a lose-lose situation. Or as Laurel and Hardy might say, “It’s a fine mess you’ve gotten us into, Ben!” This game of CHICKEN will be entertaining us over the next few weeks as the dead-line is August 2, and the world is watching.
HOW TWEET IT IS: Housing starts are sinking and prices are still falling nation-wide. I contend that the world is becoming smaller and there will be a paradigm shift in housing demand: McMansions will be totally passé. It should already be dawning on people that most all of our non-sleeping hours at home are spent in the kitchen and its adjacent-connected rooms, like great rooms. Separate dinning and living rooms are relics.
When people internalize the fact that they spend most of their non-sleeping, non-bathroom, non-eating time in a ten by twelve foot space with their various experience machine prototypes, large homes will, by and large, go the way of cars with fins and chrome. In a smaller world, we obviously will not need to drive around so much, given that so much of what we want is delivered to us electromagnetically. And, getting back to real goods and technological advances, if we take the web-based distribution a few steps further, rather than having thousands of cars running from one store to another, a couple of delivery trucks will ply the streets.
Per-capita consumption of energy and resource-intensive infrastructure
will decrease.
In short, the world is becoming smaller due to the increase in electronic gadgets. With cell phones, iPods, downloaded DVD’s, Facebook and a whole slew of virtual reality at our fingertips, we need not venture far to be connected to the world. We will basically eat, sleep, work and veg out. Give us food, plumbing, heat and our two-hundred dollar electronic experience machines and we will be happy as a clam. While a futuristic vision of our self-imposed immobility is down the road a few decades, it is easy to see the trend. We just can’t wait. Tweet. Tweet. But perhaps the housing industry should take note, smaller-green houses are in our future!
What is going on in Central Oregon? From the realtors that I have talked with, the report is that inventory is low: down 200 homes in Bend compared to last year at this time. There are a lot of folks looking but few offers being inked. Are people waiting for lower prices. Doubtful. Are they not reading my newsletters? Interest rates are going to GO UP! It is all about inflation and it is coming down the track, “forewarn is forearmed!” Call me, let me help in pre-qualifying and the education, it is what I do.
Until then, be well…
Philip Hamilton is a long time contributing writer for CBN. You may contact him by writing: phamilton@bendcable.com, cell: 541 480-7580, or come by the PNC MORTGAGE office: 235 SE Yew Lane, Suite 210, Bend, OR 97702.
