It strikes me that Americans are still trying to recover from Post Traumatic Stress Disorder from the 2008-2009 deep recession. Banks are still looking backward at the housing shock and are afraid to loan to good risks, even based on 2001 values. A large percentage of buyers today are cash buyers, often from foreign countries, or first-time buyers who don’t have to sell a house to buy one. Banks are also being closely scrutinized by examiners who have the usual government employee bias—avoid mistakes so everybody covers their behind twice, thus gumming up the lending process.
The press has a strong negative bias. I monitor the editorial choices of several newspapers and Yahoo! Finance almost daily, and the choice of material disseminated is stridently negative. I’m in the news business and I know the choices of articles printed vary enormously. By emphasizing construction’s misery or commodity speculation or Wall Street corruption every day, the press confirms lingering post traumatic stress.
The negative effects of the Japan earthquake will continue from a worldwide economic perspective for much of 2011, but the macro effect of disasters flip over to the positive of rebuilding at some point. Yet I am beginning to see automotive suppliers flinch because assembly is momentarily curtailed by parts shortages. Demand continues to be robust, but some people still get stuck in the nine million-car syndrome of 2009 instead of the probable 14-16 million unit domestic demand likely by 2013. Call it the Michigan strain of PTSD.
I am no stranger to the phenomenon of Post Traumatic Stress Disorder—I still suffer déjà vu every time I go to the doctor. But the people who always profit from shifting market conditions are those who can get comfortable with being uncomfortable from bad memories.
Question: Are you afraid to buy a house or car?