Gibson County Real Estate

Frozen Economy?

I had my own questions about the recent "issue" with the financial markets, so I found this blog and I wanted to share it with you.  I think it is so important for everyone to be informed about what is really happening with the economy right now.  Things are not looking good and it appears that a big change is coming! 

Why the Bailout Is Necessary

Tuesday September 23, 2008

^{NYSE Trader (Credit: Spencer Platt /Getty Images)}

Congress is now debating whether the taxpayer should pay $700 billion to bail out investment banks who purchased mortgage-backed securities that are in danger of defaulting. The bailout was triggered by an event last week that shows just how close the global economy was (is?) to a catastrophic meltdown.

Last Wednesday, a record $140 billion was pulled out of money-market accounts, usually considered the safest of investments. That's because investors were moving the funds to U.S. Treasuries, causing yields to drop to zero. In other words, investors were so panicked that they no longer cared if they got any return on their investment...they just didn't want to lose capital.

As described in Thursday's Wall Street Journal:

Huddled in his office Wednesday with top advisers, Treasury Secretary Henry Paulson watched his financial-data terminal with alarm as one market after another began go haywire. Investors were fleeing money-market mutual funds, long considered ultra-safe. The market froze for the short-term loans that banks rely on to fund their day-to-day business. Without such mechanisms, the economy would grind to a halt. Companies would be unable to fund their daily operations. Soon, consumers would panic.

What caused this unprecedented run on supposedly safe money markets?

On Tuesday, the once-$62.6 billion Reserve Primary Fund, a money-market fund, saw its value fall below $1 a share because of its investments in Lehman's short-term debt. Money-market funds, which yield a bit more than basic cash accounts by buying safe, short-term debt instruments, strive to keep their share prices at exactly $1 -- and "breaking the buck" isn't supposed to happen. Money-market funds are where corporate treasurers put rainy-day funds, where sovereign wealth funds park their excess dollars and where Mom-and-Pop investors stash savings. Now, money-market funds were selling what they could and hoarding cash to meet what they thought might be extraordinary levels of redemptions from investors, said one commercial trading desk head.

Banks were also hoarding cash, too panicked to lend to each other or purchase any assets, for fear of taking on bad debt. Normally, financial institutions have about $2 billion on hand at any given time. By Thursday of last week, they had an unprecedented $190 billion, to prepare for further redemptions. In other words, the economy was on the precipice of a full-scale run on the banks - and not by worried depositors as in the 1930's, but by corporate investors.

Through Wednesday, money-market fund investors -- including institutional investors such as corporate treasurers, pension funds and sovereign wealth funds -- pulled out a record $144.5 billion, according to AMG Data Services. The industry had $7.1 billion in redemptions the week before. Without these funds' participation, the $1.7 trillion commercial-paper market, which finances automakers' lending arms or banks credit-card units, faced higher costs. The commercial-paper market shrank by $52.1 billion in the week ended Wednesday, according to data from the Federal Reserve, the largest weekly decline since December. Without commercial paper, "factories would have to shut down, people would lose their jobs and there would be an effect on the real economy," says Paul Schott Stevens, president of the Investment Company Institute mutual-fund trade group.

Treasury Secretary Henry Paulson conferred with Federal Reserve Chairman Ben Bernanke, who agreed that the problem was beyond the scope of monetary policy. The Federal government is the only entity large enough to step in and stop the madness. Let's hope it is enough. Otherwise, as Paulson was overheard to comment, "Heaven help us all." (Source: WSJ, Shock Forces Paulson's Hand, September 20, 2008)

To the Future! part 2

Someone asked me the other day whether or not the proposed widening of Broadway Street would have a positive affect on the local real estate market.  Well, if this project does happen, the answer is YES!  Ofcorse, there are a few homes and busineses that will be affected negatively, but overall we will benefit from such a project in many ways. 

The general consensus that I am hearing about the Main Street project is a very positive one.  Most would agree that travel on North Main Street is so much easier and enjoyable than before.  I also hear many compliments about the new sidewalks, street signs and street lamps.  I suspect that a similar project on Broadway will garner the same response when it is completed.  Any sort of addition to our community like this will always have a good affect on our local market.  That is something that we should all be thinking about.  The better we make our city and county, the more attractive it will be to prospective residents.    I will remind everyone of this though...if the construction on Broadway does begin, it will have an immediate impact on homes and businesses that are near the construction.  I am sure that this project would take quite some time to finish, so as residents we will just have to tough things out until then.  But, the finished road would surely generate some new excitement and pride in our community.

Another question I have had recently is about the state of Princeton's town square.  I know that many people (including myself) are nostalgic for the days when the town square was full of unique busineses and was asthetically more pleasing.  It is unfortunate that those days seem to be a distant memory.  I see there being a few reasons why this area of town is challenged when it comes to sustaining business. 

First, most of the buildings on the square are very old and need so much repair.  Also, many of these buildings are no longer relavent to the layout and needs of 'would-be' modern busineses.  The next issue is parking.  There just isn't much in the way of  parking.  The projected widening of Broadway Street would eliminate even more street parking on the south side of the town square.  Another consideration is the fact that many people that have an interest in opening a small busines would find it difficult to afford the repairs on these buildings and the cost that it would take to modify them for their business.    I find it hard to believe that we will ever see the town square like we remember it many years ago, unless we are able to get some assistance from the city or the state in the way of grants or tax credits for revitalization or business start-up.

If you have any opinions, comments or ideas on this subject, I would love to hear them.

To the Future!

I have been getting a lot of feed back and questions from my blogs and posts!  I am getting quite a few questions and concerns about whether or not the market will pick up soon, and if our community will see any economic prosperity in the near future.  Guess I should be blogging about that....and here I go.

As far as real estate goes, I honestly don't see the market making a substantial turnaround anytime in the near future.  I definitely think we will see small "pockets" of improvement here and there, but this market will probably be around for another year or two.  The keys to slowly turning this around will be found through patience, education, and understanding.  It took several years of specific occurrances for us to get here and it will take several years of change to get things back to "normal".   As buyers and sellers...or even as future buyers and sellers, the best thing you can do is to position yourself in the best way possible.  So, if you are a home owner...make your house as ready and up to date as you can.  If you are planning on buying anytime soon...get your credit ready, and make realistic desicions about what you can afford.  As for right now, the best thing that each of us can do is take personal responsibility for our own choices.  If we start there, and the government and lending institution get things back on track, we should see the market slowly move forward.  So if you are looking for a quick turnaround...I don't think we will be seeing that.  Patience and persaverance will pay off though!  Stay positive. 

Stay tuned for part 2...I will be discussing community topics.

“Housing and Economic Recovery Act of 2008”

Last month, congressed passed the “Housing and Economic Recovery Act of 2008.”   Also known as The Housing Bill or The Housing Stimulus Package."  The bill is an attempt to accomplish several different agendas.  The two main agendas attempting to be accomplished are: 1) Reform lending practices.  2) jump-start the real estate market.  That is the long and short of it. 

Overall this bill should help the market to trend in a positive direction.  Some markets are already seeing some improvement.  There are several great tax credits for home buyers that will surely help so many people.  There are also some other great opportunities that this bill offers.  Here is the link to the highlights of the “Housing and Economic Recovery Act of 2008.”   

http://www.Realtor.org/gapublic.nsf/pages/hr_3221_key_provisions?OpenDocument

I encourage you to check it out and see if any of these provisions will help you.  It is my goal, in the very near future to have a local lender make a submission to this blog, explaining more about this bill and other pertinent lending topics.  Stay tuned.

The "F" Word

Foreclosure is just an unfortunate part of the real estate market...always has been, always will be.  Even more unfortunate is the alarming spike in foreclosures on the national scene.  Fortunately for Gibson County residents, foreclosure has never been an epidemic problem.  The past two years have shown an steady increase in the number of local foreclosures and that is definitely a concerning situation.  It is a situation that leaves us asking many questions.  The truth is that foreclosure effects everyone in one way or another.  Whether you are a potential buyer or seller, a real estate investor, a home owner, or someone that is actually dealing with the foreclosure process...the side effects hit close to home. 

I feel that the best way to attack this local challenge is for everyone to educate themselves about the past, present and future of our specific local foreclosure situation.  So here is my insight on the general subject, and I plan to blog about many more foreclosure specifics in the near future.

WHAT IS THE CAUSE OF THE RISE IN FORECLOSURES?

If you read the national headlines pertaining to this question, you will probably see a lot of speculation about unsavory lending practices, increase of high risk mortgages(i.e. Adjustable Rate Mortgages, Interest only mortgages, fifty year mortgages, negative amortization mortgages and so on and so forth), and the burst of the housing bubble.  Locally speaking...I would categorize all of those reasons as non-applicable.  From my recent experience and understanding of the Gibson County Real Estate Market, I suspect that it is due to a mix of the following conditions:  Slowing of the economy, inflated cost of living, longer number of days on the market before a home sales, and the decline of local home value appreciation.  Along with those possible reasons, of coarse we will always have situations in which home owners come across unforeseen circumstances and just aren't able to afford their homes.

HOW DOES THIS AFFECT ME?

As I mentioned before, foreclosure affects everyone in one way or another.  As a prospective home buyer...foreclosure actually can provide good opportunities.  With a higher number of foreclosed homes and longer times for sale, lenders are feeling the pressure to unload such homes, often for less than market value.  Most foreclosed homes need a little work, but much of the time it turns out to be positive situation for the home buyer.  Investors are also making out good as a result of these conditions.  It definitely helps make the argument that "Now is the time to buy".

As a home owner/seller, the scenario is not as sunny.  With a larger number of foreclosures in the county, it is likely that there may be a foreclosed home or possibly several of them in your specific neighborhood.  Foreclosed homes are usually vacant and often in disrepair.  This situation may cause your home value and the value of your neighborhood to suffer.  This isn't always true, but it is possibility and home owners should always make themselves aware of foreclosed homes in their neighborhood.

WHAT CAN WE DO ABOUT THIS?

In my opinion, this is the most important question of all!  Well...it's going to be a community project.  I figure that the rise in local foreclosures is a direct result of the several contributing circumstances occurring throughout the past two years.  It makes sense that it may take at least two years of changing circumstances before we see a slowing of recorded foreclosures. 

Future home buyers should be very aware of all the local conditions and projections that I have previously discussed when they are making decisions about what they can afford.  It may be wise for home buyers to get themselves into mortgages that they can manage very easily.  Stay away from adjustable interest rates and be very realistic about what you can afford monthly.  This is where it will start.  As for the community as a whole, I think it is important for home owners to do what they can to build equity in their homes.  If tough times arise, home equity can help keep home owners on top of things until a plan is derived.  Another thing that I think is important is for everyone to take a real pride our community.  Supporting the local economy will go a long way to help.   

I will conclude by offering this:  if you do find yourself in a looming foreclosure, YOU HAVE OPTIONS!!!  I say...don't give up.  The most important thing you can do is to keep an open line of communication with your lender.  Much of the time, the lender with be willing to work with you if you are behind on your mortgage payments.  You may be able to buy yourself much needed time that will hold off a pending foreclosure until you can put together a new plan.  There are so many options for you.  I will be blogging about these options in the very near future. 

Stay tuned and stay informed

A Brave New World

Welcome to my first blog!   I am extremely excited about blogging...as this is a brand new experience for me.  We are experiencing a new and ever-changing real estate market, so I figured that it was time for a new approach in the way that I provide service to the community.  So here I am...blogging and networking!  This specific market has provided a few challenges to local residents, but with the proper education and awareness...this market can be navigated with success.  I have done a great deal of research, and I consider myself to be a bit of an expert on the local market.  In my upcoming blogs, I will be bringing you every bit of information that I have.  I will blog about the ins and outs of buying, selling, financing, market conditions, mls statistics, staging, community conditions, forecloser, and so much more.  I want this to blog to be very interactive, so I encourage your participation...feel free to comment and ask questions.  I am always eager to help.  Stay tuned and don't forget to subscribe!

Looking forward,

Cookie Edwards

(812) 664-3556