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There was some positive news out of the US Department of Commerce this morning.  Construction spending dropped, but it fell by less than many economists had been expecting.  The spending fell by .3% when many analysts had expected .8%.   Housing continued to be soft with a 1.3% decline in new construction.

Circuit City announced that it plans to close 155 underperforming stores by the end of the 2008.  James Marcum, acting President & CEO, said in a statement that “[t]he weakened environment has resulted in a slowdown of consumer spending, further impacting our business as well as the business of our vendor…The combination of these trends has strained severely our working capital and liquidity.”

Now … let’s recap what the heck happened over the last two months…

Goldman Sachs reported the worst quarter since they went public with their 3^rd quarter profit plunging 71%.

Lehman Brothers now trades for pennies and is bankrupt. 

Bank of America scooped up Merrill Lynch.

Washington Mutual was purchased by JP Morgan Chase for pennies on the dollar. 

And the government decided to bail out not just Fannie and Freddie, but also insurance giant AIG.  My former colleague at TheStreet.com, Jim Cramer, said “AIG is too big to fail” and that the government needed to come to the rescue.  AIG has a trillion, that’s with a t not a b, in assets.  A meltdown of a trillion dollars would have sent shock waves throughout our economy.  On the other hand, now everyone wants a bailout.  Automakers are clamoring for a bailout, and consumers behind on mortgages say they need one, too.  All of this becomes a slippery slope, doesn’t it?

And in a move reminiscent of the Resolution Trust Corporation (remember the good ole’ days of the S&L Crisis), US Treasury Secretary Henry Paulson developed a plan to take the bad debts from banks and investment houses and package them up for an orderly sale.  That gave some stabilization to the markets for about a week or so, but then Paulson took a cue from his European counterparts and said heck with the mortgage purchases, we’ll just give the banks the money directly by buying stock in them.  And that worked … for a week or so.  Now the banks are hoarding the cash instead of lending it.  So the credit crisis continues.    

So let’s get this straight.  Mom and Pop don’t have much money anymore, but what little money they do have is now is in jeopardy.  Credit has tightened beyond all recognition and the thought of getting a loan that isn’t government backed is laughable.

You know what really frosts me?  The Congress gives billions for bailouts, a problem created because of its poor oversight of the SEC and Fannie and Freddie, but then they totally screw up what should be something simple: a tax credit for first time homebuyers.  Sure, they’ll allow the folks at AIG to waste $400,000+ on a huge party at the St. Regis with the people’s money, but no way are we going to just “give away” money to folks buying a home for the first time!  Instead we’ll complicate it and make it an interest free loan that has to be paid back over the next 15 years, $500 a year.  That way it won’t really cost the government anything … please…

Do these “lawmakers” really understand consumers?  Consumers do not want to owe the government anymore.  I can’t tell you how many times we explain the $7,500 to purchasers and the buyers tell us they don’t even want it!  Yes, they don’t want to owe the government the money back.  Either give it or don’t.  You sure give all your friends on Wall Street enough.  How about Main Street, too?

Ok, I’ll get off my soapbox about all this stupidity.  What I can tell you is that after tomorrow consumers will be more interested, not less, in getting in a new home.  Whether McCain or Obama wins, it will be a welcome change from the status quo, and I expect more consumer confidence to help us sell more distressed properties and short sales.

So let’s get excited about moving more short sales!

See you at the top!

Chris McLaughlin, J.D., M.B.A.
web: http://www.shortsalesriches.com/welcome.html
e-mail: info@shortsalesriches.com

Phone: (800) 452-7627

P.S.: 

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