During this most festive of holiday season, the sound of “cha-ching” normally rings just as loudly as that of the carolers and party-goers, but this year is different. In fact, instead of singing and the sound of cash registers ringing, we’re more likely to hear wailing and gnashing of teeth from investors both near and far as the Federal Reserve reports that Americans have lost $2.8 trillion in net worth…since last quarter!
This includes, of course, all the 401ks and stock market accounts wiped out by the continuing crashes since September. It also includes huge drops in home equity across the nation. Without doing anything differently, Americans are suddenly much, much poorer.
Meanwhile, charge-off and delinquency rates for residential real estate loans have reached 1.45 for all banks and a whopping 1.66 for the 100 largest banks. Delinquency rates for residential real estate have now surpassed 5.08 for Q3 of 2008; the highest rate for residential real estate in over 25 years.
With the economic news at home sounding so lackluster, it might seem like an odd time to invest. For those who still have a few bucks, though, this is the ideal time to buy real estate, especially here in Southern California. Whatever happens, California is still the “Golden State”. Southern California has the best weather of any part of the country, bar none, as we all notice particularly at this time of year when blizzards and snow storms dominate the weather reports and Pasadena hosts the Rose Parade, almost always under the sunniest of skies. Besides that, Southern California is an economic engine powering a good deal of the rest of the country.
Real estate values here are the lowest they have been in many years. In many areas, as discussed in previous posts, home prices have fallen below replacement costs. This situation is unlikely to continue long as bargain hunters swoop in to capture the very best deals. Mortgage rates, already low, are expected to bottom out in January at 4.5% for 30-year loans.