Week of November 3 - 9

What we are enduring is no longer a national economic crisis. We are full swing in a global financial crisis that has affected at least 11 countries around the world. Brazil, China, Germany, Iceland, India, Japan, Russia, Saudi Arabia, South Africa and the United Kingdom are now all reporting economic declines and many experts agree that their woes are a direct result of the U.S. housing decline.

World leaders gathered in Washington on Friday to talk about what is needed to get the global economy back on track. Leaders from the Group of 20, which includes the United States, members of the European Union, China, Saudi Arabia and Brazil, agreed to the summit late last month at the height of the global financial crisis.

Our government continues to struggle with finding a solid, coherent plan to give necessary aid to the troubled credit and housing sectors. The administration is still working on the best way to deploy the remaining money in the $700 billion financial rescue plan passed last month. Treasury Secretary Henry Paulson said Wednesday that the government will no longer buy troubled mortgage backed securities—the original intent of the legislation—and will mainly focus on injecting money into the financial sector.

The stock market continues its frenetically sharp swings. This week brought further poor unemployment numbers, and then disappointing retail sales which were off, the resulting fear causing sell-offs, which ultimately attracted buyers taking advantage of lower stock prices. Sounds familiar, right? Each week for more than a month and a half, it’s been about the same story on Wall Street.

Keep in mind that California compares to the rest of the country, noting that while our hardest hit areas decreased further and faster than the country as a whole, these areas are also rebounding at a much faster rate than the rest of the country. It is an important fact that consumers should be aware of.

There is an importance for local forecasting noting that it really is a mistake to paint the California real estate market with a broad brush. Markets like the Central Valley were hit much harder than the Bay Area yet are often lumped in to make sensational headlines for real estate stories. Sales, however, are up and two things we know about this sharp rise in Bay Area sales is that they are largely fueled by REO’s, and that they are dramatically pushing median price down. The positive fact is that these homes are indeed selling, and at a fairly rapid rate. As we weed through the bank owned listings, inventory will begin to decline, which will eventually cause the price point to increase.