Understanding the Credit Crunch

This is probably the best explanatory video I've seen on the national credit crisis. Hopefully it will help you better understand why we're in the mess we're in and how everything is interconnected.

The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

Numbers Don't Lie...

...the people who explain them do! Or sometimes they're simply misinformed.

The Media and Consumer Confidence

The media right now is very focused on any piece of negative news about the national housing market, often overlooking signs of light. I've been thinking about some of the housing measures, like Case-Shiller, that are often quoted in the media. If the Administration's efforts to stem foreclosures works, and fewer homes go into foreclosure, it seems to me that we could see a significant improvement in some of the home price measures, like Case-Shiller, that include foreclosed properties. It is really quite simple if you think about it. If you are taking an average of 3 numbers--let's say 2, 3, and 4--and you drop the 2, the average will increase from 3 to 3.5. Even if nothing changes to the "3" and "4" the average would go up and we'd have the impression that something changed. Keep that in mind the next time you are hearing media pundits talk about what the statistics means. 

If the indices improve (even if only superficially as shown above), and the media start talking about it, consumer confidence could stabilize. In my opinion, right now the market is being largely held back by confidence, which is keeping prospective buyers on the sidelines. Once the media starts saying we've hit the bottom, I wouldn't be surprise if we see things turns around quicker than some anticipate. Remember, moods can change very quickly! How quickly do your moods change?

Austin's Looming Housing Shortage?

With all of the doom and gloom in the national media, it's easy to forget what's happening in our own housing market. I was reading an article the other day in the Community Impact about the local housing market. One of our local economists, Angelos Angelou, argues that the housing supply in Austin isn't keeping up with the growth in population and that we are likely to see a housing shortage in the coming years. Going back to economics 101, we remember that when demand is greater than supply there is a tendency for prices to go up. Time will tell whether Angelou is right, but I do tend to agree with his basic tenant: If you're a buyer, now is an ideal time to buy.

Low interest rates combined with the $8,000 first-time home buyer tax credit would certainly get me off the fence if I were looking to stay in Austin for the next few years.