Jobs continued to gain in the month of April according to the Bureau of Labor & Statistics. 290,000 non farm jobs were created with 66,000 of them for the government as temporary jobs for the census continue to gain momentum. Have you had your friendly census worker visit you yet?
Over the last 2.5 years this Great Recession has contributed to approximately 8 Million jobs lost. Last months jobs report is encouraging, but I am not expecting numbers like that to follow month after month. And even if it did it would take about 3 years to get all of those jobs back that we lost. I hate to be a pessimist here. I want this our economy to thrive again and thrive now! I hope I am wrong, but I just don’t see how we can continue to spend the money that we don’t have and sustain any kind of momentum that we are seeing. The bailout of Greece is a prime example of that. The U. S. holds 17% responsibility in the International Monetary Fund and they just decided to bail out Greece for a whopping 1 Trillion Dollars! Greece is a perfect example of entitlement programs coming to a head. The working class can not afford to pay for all of these programs! More taxes means higher costs for good and services or less jobs. Period.
A lot of this “growth” that we are seeing is believed to be due to the seasonal time of year and the notion that many people are out spending more money instead of paying for their mortgage every month. Many of these are people who have jobs and have the money to pay for their bills, but they are strategically missing payments in order to have a little more fun this year. People are frustrated that their equity is gone so they are not seeing the value in making their mortgage payments. This is known as Strategic Defaulting. They miss a couple of months, which can mount out to a chunk of change, every month or so until the bank comes knocking. The borrower then makes a payment to appease their lender and the cycle continues over and over again. This obviously brings up a moral dilemma. What would you do? Studies show that once the value of a person’s home decreases to 75% of their balance owed, that person considers a strategic default. The more popular this idea becomes the more people will consider it. This won’t help out the recovery of our economy, but it is the sign of the times.
So the deadline for the Tax Credit was last Friday. I am curious to see how the market is going to respond. I have talked to some people who feel that there are enough buyers out there that don’t seem to care about the credit. They think this is a wonderful time to buy and won’t be persuaded by $8000 or $6500. I feel that I come from a more logical approach. I would think that if anyone was in the market to buy a house, then they would have gotten off the fence to capitalize on the tax credit. I can understand people waiting if they didn’t find what they were looking for, but that raises another issue. Those people are more than likely hard to please and quite possibly may never find a home that they like. There are so many options out there. And there will continue to be more options. If those buyers decided not to pull the trigger because they felt that prices may fall further than the tax credit value; then I can see that argument. They will also have many options for the next couple years since the defaults continue to stream in and unemployment more than likely won’t change dramatically from our current 10% rate.
So, time always tells what the future holds. I predict that sales will slow up for a month or two while we work through this. The tax credit will not be extended, but I wouldn’t be surprised if the government came up with another carrot to chase. They have spent so much money on this program already and they don’t want it to become another Cash for Clunkers program. We all know how that helped us. I’m afraid that as much as the government tries to help, and I do believe their intentions are good, they need to just allow the market to work itself out. That means that it may hurt even worse for a while, but we can’t continue to throw money that we don’t have to fix a problem. We are only prolonging the inevitable each dollar we waste. What do you think?