I’ve received emails from people wanting to know are we headed for another Great Depression. Now just to set the record straight, neither the President Elect, nor T Boone Pickens are calling me asking me for my input…but I don’t mind providing my understanding of where we currently fit into history.

Panic doesn’t cause depression; bad policy does. Foolish decisions regarding increased taxes, trade tariffs, and monetary policy are what caused the Great Depression. A great read on the subject is a book called The Forgotten Man – A new history of the Great Depressionby Amity Shlaes. You’ll see how the 1929 stock market crash did not cause the Depression.

Another great example of how different a time this is to 1929 is that during the Great Depression countries, especially America, were isolationist by nature and tried to enact a win-lose economic policy. Recently the Fed, European/British and Canadian Central Banks all lowered rates in unison and even though this cut won’t do much to bring up the credit market, it is a radical contrast to what took place during the Depression.

We are obviously in a recession and will be for a time but, as we are already seeing out West, there’s plenty of demand for discounted homes. Many short sales and foreclosures are in multiple bid situations. There’s money to be made in times like this but it requires us to take the emotions, our fears and our apprehension out of the picture.  With Mtg rates at or below 5%, this is for sure one of the best times to buy and or invest. 

Lastly, at the begining of 2008 we had a National housing supply of 11 1/2 months.  We are now at or around a 9 month supply.  A 6 month supply is said to be equilibrium.  Demand for housing is not going away so at some point we are going to turn...hang in there!

Hope this helps...Happy New Year!

Buddy Frey