For more than a decade, real property values were increasing, across the nation. In some markets, with annual increases in valuations in excess of twelve percent (12%).
Such increases are likened to bubbles and just as such, they just get so big before they burst under the strain of the growth. That which binds the bubble stretches to a point where it cannot remain intact. We’ve seen this happen with the Internet bubble from ’94 to ’00.
But real estate values are subject to corrections, just as bubbles in share values or other valued markets. Initially, this seems to be nothing more than a market correction, fixing the errors made by the hyper-drive rate of mortgage and refinancing done by some of the major players in the mortgage lending community.
As a correction, this should fix itself in about a year’s time, and there’s nothing to be concerned about. Property will drop in value, perhaps as much as 40%, but then begin to swing into positive territory again, with smaller, less volatile increases, annually.
Our concerns are for the economy as a whole. We believe this correction, compounded with other factors (see Is Depression Looming in the Economics section), could lead to economic depression in the next year or two, for the first time since the 1930’s.
America is ill-prepared for an economic crisis. We must take steps now to avoid this possibility. Thus far, the Federal Reserve Bank has been conservatively meting out reductions in the prime rate, though this seems to be the wisest course, even if Wall Street wants greater reductions. Ben Bernancke, Chairman of the FED is doing a prudent, sensible thing in not pandering to speculation, but making small corrections to see how overall markets react.
External and other factors are weighing in on this market correction too. Among these are oil cartels attempting to raise the price of crude solely for the purpose of hurting the US economy. While it may not be war in the traditional sense, America is in a third war – an economics war, with Venezuela, Iran and Al-Qaeda working diligently, day and night to destroy our government and democracy, hoping to somehow stop our attempts to influence democracy elsewhere in the world.
With the possibility of an extended or deepened recession or mild depression over the horizon, it is more important than ever for property owners to do everything they can to increase value of their properties. The battlefront for this war is not fought in jungles, mountains or the streets of the Middle East, but on your front doorstep, and supply lines are not coming from Pentagon sources, but Lowe’s and Home Depot.
By raising property values, and maintaining property well, homeowners become the nation’s citizen militia and defeat the hands that would keep the bubble from slowly rising again.
The after-effects of this market correction though are having serious effects on taxes, municipal and county governments, employment, manufacturing and so on. It becomes imperative to see this for what it is, a battle in an economic war. A war we as citizens can fight and win without the defense resources of the Pentagon. Don’t grab a gun to shoot the enemy, grab a glue gun and fix things around the house.