Yesterday my son was tripped up when running with our dog. Like superman, he flew forward and ended up with a nice “road rash” along his leg, elbow, and hands. With some TLC, neosporin, and lots of bandaids, he was ready to rock.
Later in the evening, I wanted to pull off the bandaids too look at his cuts and make sure they were all clean. I pulled off the first banaid, and of course some little hairs came with it causing that nice sharp pain that we all dread.
“Pull them off slowly, Mommy,” he cried.
“I know it hurts, but the pain is short. If I pull slowly, it will hurt less, but the pain will last longer.”
What to do about the housing industry is the subject of a lot of debate. I have been a fairly big proponent of providing little government intervention into the current housing crisis, with the exception of freeing up the credit markets. Access to credit is a cornerstone of the marketplace.
Yesterday, the LA Times had an article about the current housing crisis indicating that even Lawrence Yun was agreeing that a steep drop in prices would be a good thing. Lawrence Yun was quoted as saying in the article,
“Because the prices are going down so fast, we’ll be hitting the stabilizationpoint sooner,” said Lawrence Yun, chief economist at the National Assn. ofRealtors.
Back in the 1990’s it took 7 years for home prices to correct which is a prolonged and painful process. Kinda like pulling that banaid off sloooowwwwly. With the fast decrease in home prices, at least the pain will be short, but make no mistake. There is and will continue to be pain.
This pain is not just homeowner pain. The housing downturn has impacted the economy in many other ways. The article talked about a nursery owner who used to have a large business landscaping those front yards of those new construction homes. The article went on to quote Dean Baker regarding the impact on the GDP.
Dean Baker, co-director at the Center for Economic and Policy Research, aleft-leaning think tank in Washington, said the correction was taking a hugetoll on consumer spending.”People’s ability to spend depends in part on their housing wealth,” Baker said. “If we’re losing more than $4 trillion in housing wealth in the course of a year, that’s over $60,000 per homeowner. That has an enormous impact on consumption.”Economists say consumer spending is the economy’s main driver, accounting for about 70% of GDP.
Real estate is not affordable, it is that simple. Buyers are realizing that they are compromising their financical security if they purchase a home at some current prices.
I think it comes down to are you one of those people that just rip the bandaid off with that sharp jolt of pain…done in a few seconds, or are you one of those people that slowly, ever so slowly, peel the bandaid back trying to have only a little pain along the way, but it takes you five minutes to get it done. It is going to be painful regardless.
Me…I’m a ripper.