Is the Great Recession over?

August 4th, 2011

.....The government has told us that the Recession is over. Oh really! Well maybe in some parts of the country. Here in Florida, the value of homes keeps going down. To give you an example, when I bought my home in 1995, I paid $14,000 more than the home I sold in Asheville, NC at that time. Well as of today, my house in Florida is worth $170,000 LESS than the home I sold in North Carolina
......What does this tell us about our economy. In Florida we had a big real estate boom some 5 years ago. North Carolina did not experience much of a boom. So houses in North Carolina have actually grown in value. My old house is worth more than 2½ times what I sold it for. Which means that I would have some $300,000 in equity if I still owned the home. During the peak of the boom in Florida, I had nearly $350,000 in equity. Without borrowing any money since then, my equity has now dropped to MINUS $60,000. And I make all my payments timely.
.....So in general terms, Florida is still in trouble, while the East is holding it’s own. Business owners in Florida without equity in their homes or other assets, will find it ALMOST IMPOSSIBLE to borrow money from the banks while those in North Carolina will have a better chance since they probably have equity in their home residence. I have found that in Pennsylvania, my clients also experience housing to be fairly stable. A client of mine in Chambersburg, PA purchased a home a few years ago and while the value did not go up, at least it is being appraised for the same value today as a few years ago.
.....The best area? Believe it or not, but things are doing much better in New Mexico and other western states. Exit Realty, a client of mine, in Alamogordo, NM told me that while Florida experienced a big realty boom years ago, people in New Mexico found real estate stable, there was no boom, therefore no crash. Again if you have equity in your home in New Mexico, your equity is safe. By the way, I really like New Mexico. Almost every time I visit the state, I get more clients. Wish I could say that for Florida where I actually live. So maybe, I need to spend more time in New Mexico!! I think so.
.....The point I am making, is that without EQUITY in your home, BANKS won’t loan you any money. So how does the economy improve, if you as a business owner cannot borrow money because your ASSETS do not have enough worth? Kind of scary.
.....So WHEN will the recession really end? When foreclosures are finally completed and housing values are based on real numbers, not artificially low numbers because banks sell foreclosed houses for nearly nothing and count that in the average sales price for your neighborhood. So here in Florida, that may still be years away. Let us hope that business can stay afloat until then.
.....Henry (CEO)