Reporter's Note: President Obama could not have been happy to see the news that home prices are now officially in a “double dip” downward trend. Although I like to think he is always happy to see my daily letter.
Dear Mr. President,
I wish it weren’t true, I’m sure you wish it weren’t true, and I know beyond a shadow of a four-bedroom-split-level that millions of homeowners wish it weren’t true; but this latest report on homes prices is awful. I mean “Worse than German jazz band” terrible. And I hate to say I told you so, but…
Look, for months and months I have warned that you D.C. types can rattle on about all the many factors influencing the economy, but at the core of our economic woes is this monumental collapse in the value of homes and all the poisonous mortgages attached to that landslide. Until you flush all of those out of the weeds, I just can not see how the foundation of the economy can be considered safe and solid again. Let’s add up some weaknesses that have resulted.
One: For years Americans saved almost nothing, pumping all their cash into houses and things for their houses. When you asked about the future, many would say patently silly things like, “Well, the value of my house has gone up and up. That’s my retirement plan!” or something along those lines. Those folks are now adrift, since their “retirement plans” are not only worth a heck of a lot less than they once were, but in some places may not even sell at that price. (And oh, btw, as many failed to notice even before the crash, they’ll still need a place to live in retirement. Hovels in the woods are hell on arthritis.)
Two: As long as home prices are down, construction stays down, too. That means the job market, even if it tries, can only improve a little bit - meaning, not nearly as much as we need for a true recovery.
Three: The fear factor. When this many consumers can not rely on even a basic level of stability for their single largest investment, you can understand how they might hesitate to dive into the rest of the economy. This shakiness in the housing market scares people away from all kinds of spending and investments. It makes people afraid to change jobs. It strangles the very courage and ambition and boldness that our economy is gasping for right now.
Sorry to greet you on the first day after a holiday with such news, but then…I suppose homeowners all over the country are pretty upset about it, too. And their houses don’t come with their jobs.
Call if you get a moment. I have an excellent summer shrimp recipe to share!
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