Are you waiting for Obama’s bailout? Seriously?

Posted on | January 29, 2009 | 1 Comment

If you are a business person and you’re hoping that the bailout bill working its way through Congress is going to save our economy, read on.

Congress is not going to save your business!

President Obama is not going to increase your gross  revenue this year!

The Federal Reserve can’t help you, either.

 YOU AND ONLY YOU HAVE THE ABILITY TO MAKE YOUR BUSINESS A SUCCESS IN 2009. DON’T WAIT FOR GOVERNMENT TO HELP YOU. HELP YOURSELF.

Let me make that point by showing you why the bailout bill is flawed and won’t trigger the economic recovery we all hope to see in 2009, or early 2010.

The recession started with the collapse of the real estate market. There’s little doubt about that. And, there is little doubt or debate that (1) real estate was over-priced before the crash and (2) real estate is under-priced now.  Almost all homeowners have lost SOME equity they had in their homes. And, a large percentage of homeowners across the nation have lost ALL their home equity.  That’s largely because most homeowners had high loan-to-value ratios.  In other words, there wasn’t much equity to lose in the first place.

Much of the country’s economic health and much of the nation’s banking and financial systems are tied to real estate.  Real estate values are down, because supply (inventory) has outpaced demand.  We have too much home inventory in most parts of the country.  We have too few buyers.  Do the math- FORECLOSURES AT RECORD LEVELS.

So, you’d think that Congress and a new President with a historically high appproval rating would be focused, in some measure, on stimulating the housing markets. I am not suggesting that we encourage more home building, not for a while. We do need to bring more buyers to the market to purchase EXISTING inventory. I love home building. I have many home builders as clients. But, we need to sell more of the existing home inventory first, before we create even more inventory.

So, what’s Congress and the President doing to encourage the purchasing of existing homes?

Practically nothing.

The economic stimulus bill that was passed by the House Wednesday, January 28, does not go far enough to help home buyers and existing home sales. The House bill does remove the repayment requirement for the current $7,500 home buyer tax credit, but the bill fails to expand the credit to all home buyers. The bill fails to increase the credit amount past $7,500. The bill fails to extend the credit through the end of the year. And, the bill fails to make the credit available at the time of the sale/purchase.

The Senate has started to debate its version of the stimulus bill and will probably extend the tax credit through September 1, 2009. But, that’s about it.

Here’s the irony of the current state of affairs- We got in this mess, because, in large measure, Congress encouraged lending to people who could not afford a home loan. That contributed to home ownership at record levels, but also has resulted in record loan default rates.

Now, when we need Congress to stimulate home ownership, Congress and the President are going to spend nearly $900 BILLION on new roads and other “shovel ready” projects. But, nothing on real estate.

What’s this mean to your business or personal affairs? You can expect the recovery to take a long, long time. Dig in. Partner up. Get busy. We’ve all got work to do. Make your own good fortune (a/k/a “luck”) in 2009. Don’t wait for someone else to bail you out. Do it yourself!

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