“Why are Americans so gloomy, fearful and even panicked about the current economic slump? The slump is the longest, if not the deepest, since the Great Depression.
Traumatized by layoffs, US consumers have fallen into their deepest funk in years. Says University of Michigan economist Paul McCracken, “This is more than just a recession in the conventional sense. What has happened has put the fear of God into people.” Americans have suffered a long-term stagnation of their earnings.
In what some business leaders view as an overcorrection, many of the surviving banks have slammed shut their lending windows to all but their best-heeled customers, depriving the economy of sorely needed money for recovery.
Downsizing has dismayed recent college graduates, who have found it difficult, if not impossible to land a good job. Hard times are forcing some people to turn their back on the American Dream. “—Thanks to my friend and colleague, Rob McGarry for pointing me to this article, published in Time magazine on January 13, 1992. Click here for the link to the entire article. http://www.time.com/time/magazine/article/0,9171,974645,00.html
In 1992, I had recently finished graduate school and was lucky to have a management position in a growing HMO. Many of my friends had lost their homes to foreclosure, the aerospace companies were laying off engineers due to the end of the cold war, and everything looked pretty bleak. Who would have thought a few years later we would be entering the dotcom era and one of the most robust recoveries ever? Do I wish I still owned the home I bought in Los Angeles in 1990 for $139,000? The mortgage would have been close to paid off by now.
I don’t have a crystal ball, but I’ll bet people will be looking back at 2012 and wishing they took advantage of 4% interest rates and undervalued real estate. Even if you have no need to replace your primary residence, the real opportunity right now is in investment properties. I just saw a 3-bedroom Fox Point at Redstone condo listed for $299,000. That property will rent for at least $1800/month, a 7% ROI at today’s rental rates if you paid cash for this unit. With a 30-year fixed mortgage, the rents will rise with inflation while payments will remain locked in at record-low rates.
Don’t look back on 2012 as the year of the lost opportunity.