Fear Hurting the Markets?

On my way home after an appointment with some fantastic clients, I turned on the radio and caught Neal Cavuto being interviewed about the economy. Cavuto has always seemed like a fairly level headed fellow to me so I was interested to see what he thought of things.

Cavuto offered an insightful perspective on some of the economic dynamics going on right now. He said that the problem was NOT because banks don't have the money to loan- they do. They are just afraid of making bad deals so they've tightened their qualifications and really limited the mortgage options available, especially to 'less qualified' buyers.

He also said that the problem also is NOT that qualified home buyers aren't able to get the loans either- they can! Instead of buying, many buyers are waiting, scared to buy a home that may go down in value.

Bottom line- FEAR is hurting our economy right now.

I tend to agree with this insight. Not that there aren't other issues going on (and plenty of things to be afraid of!), but so much of the strength of the economy is based on perception or our confidence in it.

Instead of screaming that the 'sky is falling' Cavuto talked about our economy working in cycles and that certain 'corrections' are to be expected. He said that people should simply not expect to keep seeing home prices increase at 30% a year without some sort of correction. However, while these times can be painful, the overall economic slope is strong and is historically resilient.

Note: I am no economist. I'm a Realtor. :) However, I'm seeing the trickle down effects of this:

1. My investor clients are having a little more difficulty qualifying for loans that were easy just a year ago.
2. Builders are halting projects as new construction loans are drying up, waiting for new home inventories to decrease.
3. Buyers that aren't relocating are taking their time to find a home. Demanding more for less money. They've got the leverage right now.

Of course there are many opportunities out there right now- if you know where to look.

-Peter

www.NashvilleCityHomes.com