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The American Dream: Sold Short or Foreclosed?

Take a drive around America and you will see the signs … the signs of the American Dream foreclosed or being sold short. It is a sad commentary on our time, a barometer of an economy that hit the Wall Street wall …evidence that unemployment remains high and credit scores continue to go lower. Take it as a sign that we are all in it together, and the six degrees of economic separation leave little room for insulation.

Statistics dispute the trends and the recovery process is still very formative and uncertain. Everyone’s attention is focused on what comes next, are we out of the woods. Clearly, the evidence of recovery won’t be on the ground until the drive around America can be taken without the signs of foreclosure and short sale dominating the landscape. Unemployment stood at a seasonally adjusted 10.6 percent as of January, 2010. Everyone is looking for positive reinforcement, but a consistent picture of recovery remains unsustainable.

FNMAE and Freddie Mac have announced a major buyback of Mortgage Backed Securities that are seriously in default (120 day or more). The GSE has indicated that as much as $200 billion could be involved. The buyback over the next few months tallies $70 or $80 billion in addition to what has already been prefunded.

Seven million jobs were lost during 2008 and 2009 … everything is out of balance and the system can only respond accordingly.

Foreclosures for January of 2010 were reported at 315,710. This is down 10 percent from December, but remains 15 percent higher than January of 2009.

New car sales for both Ford and GM are up in February of 2010 over 2009; however, these statistics are probably influenced a great deal by Toyota’s sudden acceleration recall.

Home sales prices enjoyed a slight increase in January although Barclays estimates that an additional drop of four to five percent in the national housing market price is likely before the market reaches bottom.

Private equity funds are being formed to take advantage of the huge refinance market for commercial real estate that will be unfolding over the next few years. There will also be opportunities for relative bargains in commercial real estate during the same period. It is not likely that a sustained recovery will occur in the residential market until the commercial market has stabilized.

The big banks still hold our financial future hostage in their sticky fingers.  

The “golden rule” is alive. It is interesting that Wall Street and the Banking industry combined to bring us close to financial terror and yet there is no watchdog of reform to keep a finger on their pulse or to guide us toward future protections. Should we not have a color coding system to warn us of the threat level for the day? Green would be a code for a good day to borrow or buy. Cautionary alerts would go from yellow to orange. At least the consumer would have a way to approach the day. With this code system, let’s at least define how it should change or influence our behavior. 

When you take that drive around America in a new luxury American made vehicle and see that the signs have come down, send up the green code. Until then, take advantage of what the old and new economies are offering … it’s the only game in town. Buy a foreclosure or short sale, hedge the market, and drive the American economy.