Homes For Sale

Persisting foreclosures, unemployment and underemployment coupled with government inaction is raising fears of deflation. The American people are watching confused as on one side the reports are trickling in of a weakening economy and on the other there is non-action from Washington; both political parties have halted in their tracks and do not want to further widen the yawning budget gap. This sort of economic stagnation had overtaken Japan during the 90s. There too trouble started with real estate speculation frenzy that led to banks drowning in debt. The power circles did not want to recognize this and kept hoping that the nightmare would pass. This indecision worsened the crisis.

Joseph Stiglitz (Nobel Laureate) said, “There are many ways in which you can see us almost surely being in a Japan-style malaise. It’s just really hard to see what will bring us out”. He had warned that the Obama government had been not properly estimating the dangers pressing on the economic scene.

In Japan the painful years were worsened by deflation. Prices fell. It was something that had overtaken the economy at the time of the Great Depression. It seems that the same forces are gathering strength today. Falling prices may be good for those who want to buy cars and houses but a continued drop puts off investing and hiring employees. With more people being unemployed or underemployed means less power for spending and this creates an atmosphere against investing. It is a downward spiral.

Deflation can be taken to be the symptom as well as the cause of the condition of an economy that has come to a halt. It indicates surplus in goods and services in the market but not sufficient numbers buying them.

For over ten years the economy of the world was fueled by mega spending ability that came from two investment booms in USA – the explosion of the Internet during the 90s and then the passionate love affair with real estate. As the prices of houses soared the housing owners tapped on their increasing equity and splurged on buying in malls. The goods in the malls as well as items like furniture came from distant China where labour was much cheaper than America.

When the housing bubble burst the artery supplying money was cut off. The house owners could not borrow so their spending was curtailed. Businesses shrank and this led to layoffs.

Kevin Simpson, has been working on ForeclosureRepos.com studying the foreclosures market, helping buyers on the finer points of repo homes for sale.

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