by Bill James, CMC
Residential Bancorp
Canton, Ohio

March 2007

April 2007

May 2007

June 2007
July 2007

August 2007

September 2007 

October 2007

November 2007

December 2007

January 2008

February 2008

MARCH 2008

I had the occasion to hear the Comptroller General of the United States David Walker, speak. This guy is the real thing.  What a pleasure to hear a long time bureaucrat stand up and deliver absolute honest straight talk.  What he had to say was bone chilling but you absolutely knew it was fact.  To cut to the chase, “our country is in real trouble. The “entitlements” social security, medicare, and medicai cannot be sustained another 5 years at the rate our leaders are spending money.  This is quite a different story than what our sorry congressional representatives are saying.  I asked him why we have a lid on the social security tax withholding at $93000,  why have ANY lid?  He corrected me as the new limit has been increased to $100,000.  His answer was taking the lid off would impose a tax increase that was not politically acceptable . . . . Should have known.  His take on the new BUSH “stimulus” package is same as many of us . . . . NUTS!  We are going to send about $150 billion to our citizens, we will have to borrow the money from CHINA et al, the citizen recipients will rush to Wal-Mart and spend it on merchandise MADE IN CHINA and 1 week later we will be back in the same financial mess with the only difference being we will be $150 billion deeper in debt!  Anyway, COMPTROLLER WALKER was an excellent speaker.

For the gloom and doomers,  I really wish some media personality would truly analyze where we are in the real estate valuation/appreciation situation. Yes, we have a mess and business sucks in many areas. A big part of the slump is MEDIA INDUCED! I did finally find a business journalist who put the situation in perspective. Here is what he wrote. . . . Business Week Magazine Feb 11, 2008. Peter Coy.

      “Many economists are predicting further declines of 25% to 30% in home values over the next 1 to 2 years. Shocking though it may seem, a decline of 25% from here would merely REVERSE THE MARKETS SPECTACULAR APPRECIATION DURING THE BOOM. It would PUT THE NATIONAL PRICE LEVEL RIGHT BACK ON ITS LONG- TERM GROWTH TREND LINE, a surprisingly modest 0.4% a year after inflation.”

We have experienced an almost identical phenomenon with the 2000 stock market “adjustment”. We survived that!

POTPOURRI column in October 2007 . . . .  spoke to the need for the Fed to start rate reductions soon. It also mentioned the dangers of reducing the rates too far. I felt a decline to 3% was as low as it should go due to the dangers and damage to the value of the dollar and the inability to attract buyers of our bonds at rates lower than competition offered. Well start they did and as of Feb 1^st the Fed funds rate has been lowered to 3%. Common sense says no further declines are warranted. We now have a prime interest rate of 6%, 1, 3, and 5-year government securities are at levels that will allow adjustable rate mortgages indexed to these securities to have minimal adjustments that will not cripple a borrower. This of course will not help the unconscionable mortgages set at margins creating huge increases.

Mortgage interest rates have . . . . dropped to very attractive levels and refinance applications have risen to unexpected levels. Purchase money mortgage applications are continuing at relatively low levels but I bet you a dollar to a donut 60 days and some green leaves will see a substantial increase in sales of both existing and the inventory of new homes. It is a fact of life, every product on earth has a price level that when reached a buyer will appear! We are fast approaching an environment in both real estate and the stock market that will take on the appearance of an irresistible smorgasbord.

I remember watching . . . . . Archie Manning get his brains knocked out game after game playing on mediocre (or worse) football teams. He was a class act and never complained. He was also one hell of a QB. All those years of  pain and disappointment are a forgotten memory for the Manning family now . . . Can you imagine having 2 sons playing QB on 2 different NFL teams win back to back super bowls , and both earning MVP status! Couldn’t happen to a nicer man!

By the time . . .  you are reading this column it will only be a couple of weeks till SPRING! Sunshine, warm breezes, green leaves and flowers, can’t hurt . . . . Think positive, that can’t hurt either.

Bill James is Board Chairman of Residential Bancorp in Canton, Ohio and can be reached @ 330-495-6041.