Economics 101

The calamity of Bear Stearns brings up memories of a long ago classroom in Long Beach, CA and my failure to pay adequate attention to a very good economics instructor named Duane Taylor. Maybe a little more attention then, would clarify for me now, how intelligent business people could become embroiled in the fiasco that is our current financial marketplace. This shambles in the credit markets would be more understandable if the companies were run by a bunch of people recruited from around the blackjack tables in Las Vegas, but they're not. These folks are MBA's with substantial training in the workings of credit and the necessity of supporting collateral for credit extended, so this kind of failure is really inexcusable. Bear Stearns, number two in underwriting mortgage backed securities, announced that in the last 24 hours there had been a substantial deterioration in their liquidity. Other traders and banks were reluctant to trust their offerings, so, no money. You and I would have this same explanation for our position if our last check bounced. Fortunately for the market, the New York Fed moved to funnel money to them through JP Morgan/ Chase, so saved by the bell for at least 28 days, and the market so far has survived this first shoe dropping.
If the government can manage to keep their hands out of this mess, let the miscreants take their hits, then the situation will right itself, sooner rather than later. If the government tries to fix a train wreck with band-aids then the end will be a longer time in getting here. There has been no underlying value to the mortgage securities, or at least not enough value, for some time. To believe otherwise is to ignore reality and conjures up many similes; "The emperor has no clothes", or from the biblical, "making bricks without straw ", and my favorite from Gertrude Stein in her description of her home town of Oakland, "There's no there there".
At a more practical and local level, our real estate market is really in the doldrums in Butte and Glenn counties, Chico and Orland particularly. Sales are down, inventories are high, and people who might buy are worried about the unknown. For those thinking of buying or selling now is as good a time as any if the reasons for doing so are valid. If selling, the value is probably as high as it's going to be for the near future. If buying, prices are down, generally realistic, interest rates are very favorable, and if you intend to live in the home for a fair period of time, you'll very likely make out just fine. Just remember, a home is not a speculative investment vehicle. If you believe otherwise then you're holding a ticket on cruise ship that has already sailed.
We need some help in our mortgage section. If you know of an honest, reliable, licensed agent that would consider changing employers, we'd like to talk to them. We do everything residential except FHA, plus commercial. Special products for CalPERS and CalSTRS and Calhfa for first time home buyers, plus other down payment assistance programs. Have them call me.
As usual,
Thanks for visiting.