So here we are as a nation with a slumping stock market, frozen lending market and a financial market in disarray.\u00a0\u00a0 Our national leadership has come up with a $700 billion bail out\/rescue plan that may only be the beginning of the fix.\u00a0 We now own part of\u00a0 the largest insurance company in the world and will soon own part of the largest banks in the United States and in some cases, the world.<\/p>\n
The most unsettling thing about all of this is that no one seems ready to say that this is the final fix. After all these heroics we don’t really know what will work because nothing quite like this has happened before.\u00a0 It sounds like the next step will be taking a hint from the FDR New Deal days and start massive public works projects.<\/p>\n
The most striking image that I have in all this is that our financial and political leaders insist on saying that no one could forsee this.\u00a0 Well, that is not exactly true.\u00a0 My wife Barbara forsaw it 3 1\/2 years ago.<\/p>\n
You see Barbara does our property management for our or our client’s properties.\u00a0 The apartments that we manage tend to slant toward the lower socio economic strata of our society.\u00a0\u00a0 Around 3 1\/2 years ago tenants who were barely able to pay $800\/month rent for an apartment suddenly gave her notice that they were moving.<\/p>\n
In come cases these tenants had been in their apartments for years.\u00a0 When Barbara goes to the various buildings she tends to say Hi to the tenants and spend a few minutes chatting with them. She knew their economic circumstances such as where they worked, how many hours they worked and the way they managed to get through the high cost of living in Orange County.<\/p>\n
Most of the tenants were moving to the Inland Emprire where they could live the American Dream and buy a home of their own.\u00a0 The warning signals that came up were that they were buying homes for $300,000 to $500,000.\u00a0 How could these people who struggled to pay their bills each month possibly come up with a 10% to 25% downpayment for a home in that price range.\u00a0 How could they possibly pay 2 or 3 or more times their monthly rent for their new housing.\u00a0 How could these well meaning and hard working people possibly qualify for a loan, much less actually service it.<\/p>\n
The answer of course is that they couldn’t.\u00a0 Loan officers were blind to this, banks were blind to this, investment rating agencies were blind to this, the Wall Street packagers were blind to it and the ultimate buyers of the loans were blind to it, not to mention Congress being blind to it.\u00a0That is a lot of people that simply did not want to think about future consequences.\u00a0 But Barbara did.<\/p>\n
Actually there were a great many people who could see the danger in all this.\u00a0 However, they were the ones who were not making money from this national pastime of kidding themselves.\u00a0 In reality anyone who has any business background at all knows that not checking on credit and an ability to service a debt is flirting with disaster.\u00a0 The subprime mortgage business was\u00a0a disaster waiting to happen.\u00a0 The only thing I believe that most people did not forsee is that this fiasco would take down the entire world.<\/p>\n
Sooo now what?\u00a0 Well I wish I knew but I don’t.\u00a0 In my commercial real estate world things have really slowed down while people are scratching their heads wondering what to do next.\u00a0 The strange thing is that commercial real estate in Orange County is still in fairly good shape.\u00a0 Sure prices are softer than last year but they haven’t plunged.\u00a0 Office vacancies have opened up more than is comfortable but industrial is not terribly out of whack. Retail vacancies are still relatively small\u00a0and are\u00a0threatening to open up but they haven’t yet. Apartments are doing well but it looks like rents will not be climbing much in the next year or 2.\u00a0 Vacancies may open up more as homes and condo rentals increasingly come on the market.<\/p>\n
Basically commercial real estate is sort of tip toeing in the dark right now.\u00a0 It has not been horribly affected by the current recession in our country and it’s hoping to get through all this intact.\u00a0 Let’s hope it does.<\/p>\n
\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"
So here we are as a nation with a slumping stock market, frozen lending market and a financial market in disarray.\u00a0\u00a0 Our national leadership has come up with a $700 billion bail out\/rescue plan that may only be the beginning of the fix.\u00a0 We now own part of\u00a0 the largest insurance company in the world […]<\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[20,23,47,102,122,137,148,163,176,183],"class_list":["post-31","post","type-post","status-publish","format-standard","hentry","category-uncategorized","tag-apartments","tag-banks","tag-commercial-real-estate","tag-loan-officers","tag-office-vacancies","tag-rating-agencies","tag-recession","tag-retail-vacancies","tag-subprime-mortgages","tag-wall-street-packagers"],"_links":{"self":[{"href":"https:\/\/www.swartzcre.com\/observations\/wp-json\/wp\/v2\/posts\/31","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.swartzcre.com\/observations\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.swartzcre.com\/observations\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.swartzcre.com\/observations\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.swartzcre.com\/observations\/wp-json\/wp\/v2\/comments?post=31"}],"version-history":[{"count":0,"href":"https:\/\/www.swartzcre.com\/observations\/wp-json\/wp\/v2\/posts\/31\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.swartzcre.com\/observations\/wp-json\/wp\/v2\/media?parent=31"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.swartzcre.com\/observations\/wp-json\/wp\/v2\/categories?post=31"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.swartzcre.com\/observations\/wp-json\/wp\/v2\/tags?post=31"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}