Waiting for Bernanke

    I opened my newspaper this morning (I know I'm dating myself) to find the AP breathlessly reporting that "...for the first time in 4 years the Federal Reserve appears ready to lower interest rates...Tuesday."  This is exactly what many in our industry have been waiting for in the belief that, armed with a new quarter or half point lower interest rate Buyers will suddenly start snapping up homes.  Irrational exuberance, anyone?

   Maybe a dip in the interest rate will provide some stimulus to the real estate market.  It can't hurt.  But it's not going to be anything dramatic.  I've reported in this space before that here in Lincoln County, Maine we sell about 500 homes a year.  Sometimes a few more sometimes a few less. Over the long term prices go up.  Over the short term prices do dip but by and large prices move upwards, sometimes just slower than at other times.  A small change in interest rates is not going to dramatically change this dynamic.

   While a rate cut may have positive ramifications in the stock market the next day, I would be surprised if we saw any change in activity in our real estate market before spring and I hate to even think about how far away that is!

   The fact remains that we currently have 3 to 4 times more inventory on the market than we have buyers to consume that inventory. For the vast majority of home buyers, it is the single biggest purchase they ever make and they tend to take their time and move carefully. They will  in all likelihood have a Buyers agent who will be analyzing the value of the home of their choice for them. That means that in order to sell a home must be priced fairly and in the best possible condition since it will be compared to many other homes presently on the market. If you're considering placing your home for sale, please call today and arrange for an objective market analysis and recommendations for what you can do to prepare your home to compete for Buyers attention.

Jim Cosgrove

Comments

[Ames Tiedeman]

Bernanke has a big job ahead of him.
We cannot sustain 800 bilion a year trade deficits. We cannot export our way out of this mess. The only answer is a sharply lower dollar to drive manufactruing home and to lower the trade deficit. The dollar has much farther to fall. What you are seeing is a long term effort (it will take 20 years) to get the trade deficit back under 1% of GDP. We are currently running a trade imbalance of nearly 6% of GDP. No nation can do this. The IMF would be stepping in to help any nation if its trade imbalance went to 6% of GDP becuase its currency would collapse! The U.S. is different, but still, we cannot sustain a trade deficit of this magnitude. People must understand that when we buy an item from say China, we pay in dollars. The Chinese company we just bought from them goes to an Exchange Bank in China and converts those dollars to Yuan. The Chinese banking system (Chinese Government) is now sitting on those dollars. They can either 1, buy oil, 2, buy Treasuries, 3. buy U.S goods, 4. buy U.S. Corporations, 5. other. Over time if we (the U.S. ) continue to run a trade deficit we could simply be completely bought and controlled by foreigners. Warren Buffet has explained the situation as being like a rich Texas farmer who loses a small piece of his land year after year and never notices for a while. When he then notices, tragedy sets in because he no longer controls his land. So in sum, we need to get the trade deficit way down. This is why the Fed has abandoned the dollar. It wil be going down for the next 20 years. That is how long it is going to take to correct this imbalance mess.