Housing Will Lead the Economic Recovery

1987: The market dropped from 1st quarter Dow Jones Industrial high of 2722 to 1739 in the fourth quarter with a one day event that dropped the market 22.4%.  The market lost over 1/3rd of it's value in just a few months.

Today we are all very concerned about the events that are occurring as we stare at these daily stock market adjustments. We just need to keep perspective - it wasn't the end of the world in 1987 and isn't today.

First, despite the enormity and significance of these events, the market will find it's bottom and the buyers will be coming back in.

Second, this winter will be hard on the markets for a variety of reasons that are natural beyond the financial services industry impact on the global economy. We are headed into winter. Energy prices will rise simply due to heating oil consumption. Retail sales will be low in the 4th quarter and will result in worse earnings for the large retailers. Many, or most, major companies will have worse 4th quarters and worse year end earnings due to losses this year. We should just be prepared for this.

Third, if you compare to 1987, the market today, even if at 8,000 when it bottoms just to pick a low number, would still be 400% more valuable than at that time. Markets come back from corrections. Anyone who stayed in during that huge correction would be 400% better off today.

Fourth, Housing values are really staying very stable this year versus other investments. Many of the publicly acclaimed weaker markets in our footprint are actually seeing significant sales increases over 2007. Add to this the fact that a significant part of federal policy to improve the economy is focused on housing and financial institutions that support housing, combined with the fact that pent up demand is at a near peak, and I still believe there we should all be feeling better about our industry forcast versus most others. Put another way, we corrected first then other industries followed. In that context, it is not a surprise that housing ususally leads the nation out of recession.

Look at Warren Buffett. He is generally known to be one of the most brilliant investors in the world. Google him today and see how many companies he is buying right now. Warren is a buyer in this market. He sees the bottom.

I know we are looking for the magic answer, but the reality is that we sit in the best seat in this economy and home buyers will be the first to reap the rewards. Real Estate right now is the safest investment "bet" there is and financing is readily available. I still remain bullish on 2009, and it's our focus and optimism together that will help us all team up to focus on these wins ahead.

Just one view.