Phillip's Blog

A couple of months ago I cheerfully predicted that we would be out of the housing slump in this area by the spring.  Well, here we are.  It’s spring and the slump continues.  Shall I be man enough to say I was wrong? 

Ok, I was wrong. And not just with resales but with new homes as well.

The National Association of Home Builders reported last month that housing starts were down all across the nation -- in every region. But the South saw a hefty decline of 12.6 percent.

NAHB President Sandy Dunn, reported that: “Builders are dramatically limiting starts of new homes in an environment of weak sales and heavy supply, ratcheting down production of single-family units to its slowest pace in 17 years."

Yeah, well, it’s ABOUT TIME!

What I had not predicted (nor did anyone else for that matter) was the huge run up in energy costs that have so seriously affected every aspect of our day to day lives.  As I write this, gasoline is at $3.599 per gallon.  I always got a kick out of that 9/10ths of a cent they have always tacked onto the price of a gallon.  Why not just call it what it is - $3.60 per gallon?

It’s not just the price of gasoline either; it’s the price of oil.  Think about it.  Oil prices impact us everywhere, from the asphalt streets we drive on to the roofing on our homes, to the clothes on our backs.  We as a society are completely controlled by the oil barons.  This is the 21^st century version of slavery; the only difference is that we willingly placed our necks in the shackles.

In response to the housing market the Fed has slashed and slashed and slashed the interest rates.  To what end?  In their attempts to alleviate the cyclical nature of the economics of the housing industry, they have dumped money onto the streets like never before.  In doing so they have killed the value of the dollar and dramatically increased the cost of anything imported into this country.  And what is the single largest dollar cost item imported into the US?  Oil.

By going so far with the interest rates trying to stop the downward trend in housing, they have actually exacerbated the problem by creating the environment for the huge upswing in energy costs.  It’s a catch-22 and the Fed played right into it.  They should have stopped cutting about two cuts ago.  But what can I say?  This is an election year.

Now we have the worst of all worlds…way too much inventory, declining prices, and buyers with the jitters.  That’s the bad news for everybody.

The good news is that finally all the economic gurus tend to agree that we are in the “belly” of the recession.  And like my old boss used to say, “When you are at the bottom, there ain’t no where to go but up.”

But then he was wrong once too.