Blame It On The Weather

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Source of Title Blog

Blame It On The Weather
by Robert Franco | 2007/04/26 |

I guess I would be remiss in my duties if I didn't address the dismal figures in the housing market that hit the news yesterday. Even David Lereah, chief economist at the National Association of Realtors, couldn't put a positive spin on it - and that is his main job. Though you have to give him some credit for softening the blow. Existing home sales fell 8.4 percent, the steepest decline since January 1989. Lereah blamed it on the weather.

Unusually bad winter weather in February curtailed home shopping, slowing sales that closed in March, which may have been dampened further by a decrease in subprime lending volume, according the the National Association of Realtors.

...

David Lereah, NAR's chief economist, expected the drop. "For the last couple month we've been expecting a weather 'hit' on home sales finalized in March, but looking at overall activity in the first quarter we see that existing home sales averaged 6.41 million - a figure that is moderately higher than the sales pace during the second half of 2006."

...

"It's too early to measure a significant impact from tighter lending standards, which should moderately dampen activity, but we're still looking for existing-home sales to gradually improve during the last half of 2007," Lereah said.

Other economists were reporting that consumer confidence may be to blame as rising gas prices undermined how Americans feel about the prospects for economic growth. Granted, I'm not an economist and I don't spend my days watching the economic indicators formulating detailed analysis to postulate that bad weather or high gas prices are to blame for our housing woes. However, I do have a theory that is at least as valid as "let's blame it on the weather." Has anyone considered that nobody has any money?

Source of Title Blog ::

My father's generation, and those before, worked hard, saved their money, and lived within their means. When they wanted to buy a home they saved for a nice down payment on a home they could actually afford. The past decade or so, money was readily available to borrow - big homes and new cars were easily financed and anything else you wanted could be bought with a credit card. Credit made it easy to buy everything now, whether you could afford it or not. The buy now, pay later way of life comes at a price and I think we are beginning to see that now.

Here is an excerpt from a report released early last year:

On average, Americans used 0.5% of their savings to help keep their finances in the black in 2005.

"The savings rate in the United States hasn't been this low since the Great Depression," said a Tuesday editorial in the Cincinnati Enquirer.

"But back in 1932 and 1933, unemployment was rampant, and many families had to break the piggy bank just to keep food on the table. This time, the analysts are saying, Americans seem to be spending money they don't have just to maintain a lifestyle to which they've become accustomed."

But the Associated Press describes the situation in a decidedly harsher manner, saying that "Americans seem to have the feeling that it is wimpish to save."

Homeowners have extended the cycle by refinancing to use their home equity to pay off their credit cards so they could start their shopping spree anew. But this time, there was a catch that most were oblivious to. Rising interest rates caused payment increases in variable rate mortgages and home prices have been declining for eight straight months. The equity is gone and we have reached the "pay later" part of the new American way of life.

How are we as a society going to deal with the debt that is due when we can't borrow any more money? By "tightening our belts," a phrase that probably hasn't been uttered by anyone under the age of 50 in the last decade. As I mentioned in a previous post, I live in a modest $100,000 home and my father still thinks I spend money "like it grows on trees," another out-dated phrase.

My point is that the economists cite things like "economic confidence" as if we all sit around thinking that things might get worse so we better not spend any money this month. In reality, for most, things have already gotten worse. They look at their bank balance that rises and falls with each payday and they can no longer fall back on their home equity. Now they realize its a necessity to be more frugal - there is simply nothing left after the bills get paid.

Americans live in the here and now, from paycheck to paycheck, from credit card statement to credit card statement... "from hand to mouth." We need to be more responsible with our finances. We need to adjust from a by now, spend later society to one that saves and lives within our means. During this period of adjustment it is only natural to see a slowdown in home sales, car sales, and discretionary spending.

It won't last forever, but I think we will see it last a few years while we try to pay-down our debts and save a few dollars. I just hope that we learn our lesson and when things begin to improve we see more responsible, sustainable growth in our economy. Hopefully it will be an economy where we spend what we earn, not what we can borrow.

I'd like to thank dear old dad for teaching me to save and live within my means. Though I don't do as good as I should, without his wisdom I would be much worse off.

Robert A. Franco
SOURCE OF TITLE
rfranco@sourceoftitle.com

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Categories: Economic Indicators

1298 words | 4289 views | 2 comments | log in or register to post a comment

	Thanks for the insight, Rob. Your ...
	Thanks for the insight, Rob. Your post brings to mind one of my own father's favorite aphorisms: "You can't borrow your way out of debt." Daddy was just a simple country boy from Oak Ridge, TN who didn't have a whole lot in the way of formal education, but I still regard him as the smartest and wisest man I've ever known. He managed to support a wife and five kids on a construction worker's salary without going into hock up to his eyeballs. I think we'd be a lot better off if we all followed the advice of our parents: live within your means; spend less than you earn; and put a little aside "for a rainy day".
	by Scott Perry \| 2007/04/27 \| log in or register to post a reply

	Nail. Meet the head. Y...
	Nail. Meet the head. Your point is right on and I think that this will also have a large impact on freight demand in the transportation sector.
	by John W. \| 2007/04/30 \| log in or register to post a reply

Source of Title Blog

Robert A. Franco The focus of this blog will be on sharing my thoughts and concerns related to the small title agents and abstractors. The industry has changed dramatically over the past ten years and I believe that we are just seeing the beginning. As the evolution continues, what will become of the many small independent title professionals who have long been the cornerstone of the industry?

Robert A. Franco
SOURCE OF TITLE

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