Market Recap - Palo Alto Real Estate

The latest economic releases indicate the economy remains a mixed bag of nuts. Fortunately, the good stuff – the cashews, almonds, and hazelnuts – are accounting for more of the bag. For instance, banks continue to earn their way out of the mess they got themselves into in 2007 and 2008. JP Morgan Chase, Goldman Sachs and Citigroup all posted stout earnings last week, indicating that last year's financial crisis may turn out to be more of an inconvenience from this point forward as the banks continue to successfully clean house.
Cleaning house is an apropos term. Most of the major banks, along with Freddie Mac and Fannie Mae, say they have increased foreclosure activity in recent weeks, lifting internal moratoriums that temporarily halted the process. The recent change in attitude is one reason the number of foreclosures jumped 175,200 last month, according to Foreclosures.com.
The news on the foreclosure front isn't as dire as you might think. The foreclosure problem was always there. You could say that everyone had been whistling past the graveyard for the past few months. Now, it appears that banks have the confidence and financial wherewithal to address the issue head on. The good news is that the sooner the issue is addressed, the sooner it can be resolved.
Mortgage rates are still low, and fueling a bit of a refinance boom as such. Depending on FICO score, income, debt-to-equity ratio, and down payment, a 30-year fixed-rate mortgage can easily be had for under 5 percent – a bottom from a historical perspective. What's more, recent data on consumer prices suggest rates should remain low, at least for the near future, given that inflation is currently a non-factor. Keep in mind though, the Federal Reserve has been flooding the market with money over the past six months, which will eventually stimulate inflation, and therefore stimulate rate increases.

Focus on the Long-Term
When times are tough, the first course of action is to cut back spending on personal and business expenses. In short, we are reacting to a distinction between risk and uncertainty, first noted by economist Frank Knight. Risk, according to Knight, describes a situation where you have a sense of the range and likelihood of possible outcomes. Uncertainty, in contrast, describes a situation where it’s unclear what might happen, let alone how likely the possible outcomes are. Uncertainty is always a part of business, but in a recession it dominates everything else; no one’s sure how long the downturn will last or whether we’ll go back to the way things were.
Uncertainty overwhelms the economy with a sense of “short-termism.” We lose the ability to see the forest through the trees. Short-term considerations trump long-term potential, so we cut back on investment, advertising, and overall business activity. But there’s a trade-off for doing so: numerous studies have shown that businesspeople who keep spending and keep working to build their business do significantly better when the economy recovers than those who made deep cuts during the downturn.
Today, most people are far more worried about sinking the boat than about missing it, and that creates opportunities for those of us who are far more concerned about missing it.