What Next Year Looks Like


Right about now, most economists and business owners start looking into their crystal balls and projecting what the new year will bring and how they might handle it. Let’s take a look.

Quantitative easing (QE3) is doing great at driving the stock market, but it has no impact on the economy. There is a separation of realities taking place – government is propping up Wall Street and trying to drive stock market valuation, but the core elements of economy are stumbling or stalled at the same time.

The market is not working as it should. Supply and demand are perfect partners and need to drive one another without us meddling. People are so scared that their manipulations are leading to massive distortions and separations between what should always run in symmetry.

To get the economy running well, we need clarity in lending. We need a secondary market with a sub-prime option and a hard money option. We need to understand qualified mortgage.

Government can help by defining all of these elements, setting parameters, so the rest of the economy knows where the lines are drawn. You can’t blame a bank for lending in a situation it didn’t know it should avoid.

I hate to say it, but we must understand today’s buying psyche and how it’s changed from years past. We can’t ignore that a third of home-buying consumers now believe strategic default is A-OK. That affects lending big-time and is likely to increase interest rates, create hesitation on the part of lenders and lead to more required insurances.

We need to start the conversation about how to change housing to factor in strategic defaulters. Do we insist on such high down payments that people wouldn’t strategically default? Or require insurance policies that cover the lender for more scenarios like this?

I wish I could say there is an easy forecast for housing in 2013, but I can’t. These are uncharted waters were facing, and we’ve got to sail according to the direction of the wind, understanding that it shifts and changes almost on a dime, and we have to lean into it, or we are likely to tip.