Signs of Recovery?


A month ago on my blog, I posted my opinion on two things to watch out for that would signal the start of a recovery.


The first was that bad assets need to be taken off the books of the banks.

Yesterday, the Treasury Secretary officially announced the White House’s plan to clean up bank’s balance sheets.  I won’t bore you with the details.  Suffice it to say the stock market responded with a nearly 500 point jump in the Dow.  The smart money obviously agrees that this is a critical part of leading us out of this crisis.  Any recovery will now largely depend on the success (or failure) of the execution of this plan.  So we can say the first signal has now arrived.

The second piece was that homeowners who are upside down need to be put back in an equitable position.  The administration has not provided any direct relief on this front.  It would simply take too much money.

However, the House recently passed legislation which would allow bankruptcy judges to alter the terms/balance of a mortgage contract.  This is now before the Senate.  It may provide relief for some if passed.  If nothing else, it provides an additional incentive for banks to accept short sales – as a judge could force the loss on them anyway if the borrower decided to declare bankruptcy to get relief.

More importantly, low interest rates and low prices are resulting in a dramatic increase in buyer interest.  I’m seeing a sudden surge in  pre-qualifications, purchase offers, and accepted contracts.  Although I can only directly speak for my experience in Key West, housing starts (new construction) nationwide surged in February after falling for eight months.  These are all certainly signs that the freeze in the market is starting to thaw.

Stay tuned.

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