I Can See the "New Normal"

I heard a speaker from the Federal Reserve explaining the current state of the economy the other day. He was telling us about the virtues of the $600 billion dollar treasury purchase with money they plan to print. A question I have is why they buy the treasuries from a broker instead of buying them from, well, the Treasury Department? Nevertheless, I then read where someone else says we're doomed because of the same move.

I see that the metro Atlanta area set new monthly and yearly foreclosure records. If they are also setting new records on not selling foreclosures, how does that affect the market? Then I see where existing home sales are up. Well zippitty-do-dah!

What do I believe? I believe in my phone. It's a lot like when the weatherman says it's fair outside today, but the sidewalk by your window is wet. When they give me news, I read it whether I believe it or not. When they tell me things are great, but no one is calling, I get worried. When they tell me we're doomed, but I'm too busy to eat lunch, I'm not so worried.

I think we are reaching the "new" normal. "What say you Barnes?" you say. I have been to three closings in the last couple of weeks. In each closing, both parties got killed on the sale price. However, instead of being bitter and combative like they used to be, they were friendly and congenial throughout the process. What is the difference? Both sides understand that they are getting screwed, but not by the other side, so they commiserate in their shared pain. So why is that a revelation? Because those people who are selling real estate nowadays have come to accept the fact that they are not going to make any money, and are quite likely going to lose a ton of money instead. The market expectation has adjusted to the "new" normal where expectation matches the likely outcome of events, so if you don't like the outcome and don't have to sell, don't sell. Sellers have to deal with reality, and that is now happening. We can now begin to work our way out of the huge inventory.

Furthermore, many buyers are coming to grips with the fact that they can't just make any ridiculous offer and walk into a home that is in perfect condition. Now that we have adjusted, they understand that home prices have already been reduced to more realistic values, and there is less need to make lowball shots.

I think we are finally grasping the magnitude of the problem, and now we can move on.