Ridiculouosly uncomfortable times...

“To be uncertain is uncomfortable, but to be certain is ridiculous.” (Chinese Proverb) from my favorite source of quotes like these – the Jack’s Winning Words blog. I’d have to say that these are uncertain times and that I’m not comfortable with where things are headed. There are certainly indications that a recovery is under ay, that we have bottomed out and started back from this terrible recession; and yet, there are also those who see the very real possibility that this is a double-dip recession – one that has a false bottom and gives the illusion of a recovery, only to plunge even further when that brief respite ends.

I have witnessed some indications of relief, albeit very small ones locally. We have had a few months now of slightly declining inventory in the real estate market and a month or tow of increasing median sale prices – both supposedly leading indicators of a recovery. I have also noted that foreclosures and a percentage of overall real estate sales has steadily dropped through the year from high in the 70% range to just about 30% by the end of the year. That, too, is a good leading indicator of change for the better.

Locally, the market has shifted from predominantly foreclosures to short sales in the distressed sector, which at least indicates that people are more pro-active about being in a distressed state and trying to do something to avoid foreclosure. While that’s good, it is still disturbing that there is such a high level of distressed market activity – still well over 50% of all sales. We still have a big problem, but now people are so used to it that they are acting faster to get out from under their distressed homes.

We also still have a market where a great number of homeowners (some would say the majority) are under water on their homes – they owe more than they are currently worth. I’m not sure what the exact turnover ratio is for home in this area, but if I believe that we are now at value levels that are about at the 1998/99 level, I have to believe that a huge percentage of our local homeowners have properties that they bought since that time that are now worth less than when they purchased. Since that same 10-years timeframe was the heyday of the 100% financing boom, most of these houses are worth less than what they are mortgaged for – of that we can be certain.

We used to be certain that homes always went up in value over time; now we are certain that this is not always true. That turns out to have been a ridiculous assumption. So, now we are uncertain when the recession will be over and how soon home values will come back. That is an uncomfortable feeling, but one we may need to get used. There is probably some Chinese saying to cover the fact that the “good ole days” that we so fondly remember are gone forever and that we will need to adjust to a new reality; however, failing that I’ll just blend a couple of modern day sayings – It is what it is, so get on with life.