The domino effect is still fully in play and housing prices are on average still falling, effectively blocking the economy from recovery.
There are now new fears in the world of economics. Falling home prices continue and that is causing a lot of uneasiness among some economists. It is simply amazing to me how these topics, in the news, and presented to the American public come and go. The spins that are put onto them and how the back peddling starts when predictions don’t go the way they were predicted. I remember just a week or two ago, the evening news and the news papers telling me that the housing market is back. It was telling everyone to take a deep breath and enjoy this bit of great economic news. It was also reported that home prices were again on the upswing.
Now there are fears that the housing crisis is not over and that there could be a “double dip” as values continue to fall. A double dip? There can only be a double dip if we truly hit bottom and were rebounding, which we haven’t. In my opinion this recession is still ongoing, getting deeper and the key to all of it is housing. Real Estate values continue to drop and as long as that is happening it is fueling the recession even more.
Today in the Florida Times Union it was telling how property values have created a tremendous fall in property taxes which has led to a short fall in city and county budgets. The city of Jacksonville had a tax revenue of $61.18 billion in 08, now their tax revenue is down to $55.43 billion, a short fall of over $5.6 billion.
I have only one question? Didn’t local governments see this coming until now? When you have a budget short fall there are only two ways to balance it, increase revenues or decrease expenses. It seems decreasing expenses is something that is foreign to local leaders though, they all try to keep the status quo.
We have not seen the bottom of Real Estate yet, believe me there is more to come. You and I have talked about this in the past. The values of commercial properties is getting ready to take another fall in values. There will be more foreclosures and defaults on loans, banks will do what they seem to do best, tighten even more on lending which will continue to choke businesses to the point of default and closing. This will only lead to more foreclosures and higher unemployment. We must remember one important aspect of this entire mess; these same banks just three years ago were throwing money around like drunken sailors in a bar. Now all of a sudden they have all put on their stern, frowned faces and all but put signs up that says no lending, to anyone for any reason. How quickly they circled the wagons.
We will all see changes in our local and state governments, if not this year then next year for sure. Nassau County’s Clerk of the Court cut 11% out of his budget and is widely “attacked” for doing the inevitable. Yes, I am saying this economic crisis is far from over and will be around for a long time to come. I really hope I’m wrong on this one though but I do agree with my friend Dr. Ramakers, our publisher, that we’re in the big eye of the hurricane. We fought the credit crisis with massive bailouts and now we’re facing the currency crisis of too much government debt on the other side of the eye-wall.