29/05/2024

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Interpreting Market Signs in the New Testament and Today

Interpreting Market Signs in the New Testament and Today

“The real estate market is coming back!! Did you see the news last night? The Fed and Obama say the recession is over. They’ll be buyers for my house in no time!” (Charlotte Landlord)

“…When evening comes, you say, ‘It will be fair weather, for the sky is red,’ and in the morning, ‘Today it will be stormy, for the sky is red and overcast.’ You know how to interpret the appearance of the sky, but you cannot interpret the signs of the times.” (Jesus Christ, recorded in Matthew 16:2-3)

In the Bible, one of the disciples’ FAQ’s to Jesus was how they would know that the end of the world was near and when He would be coming back to reign on Earth. Jesus did not back down from the question and gave them telltale signs on what to expect. “You will hear of wars and rumors of wars, but see to it that you are not alarmed. Such things must happen, but the end is still to come. Nation will rise against nation, and kingdom against kingdom. There will be famines and earthquakes in various places. All these are the beginning of the birth pains.” (Matthew 24:6-8)

Jesus himself gave direction on what signs to look for before His return, but what about the “signs” the financial experts say to look for that will signal the real estate market’s return? They are all over the map! Who has the right answer? Maybe we need to take a look at the “signs of the times” ourselves.

To start, I don’t give any credence to the scattered news stories from business owners that say “things seem to be picking up” and “Bob called me and said this was his busiest week selling horses since he can remember- Daggamit, he’s fixing to believe that even Bessie will have a new home this week!” The stories make us feel good, but are unreliable signs of an imminent market upswing. As my UNC-Chapel Hill professor, Bob Adler, said, “The plural of anecdote isn’t data. It’s anecdotes.”

The data that I rely on is rooted in common sense; it’s much like the Warren Buffett “invest in what you know” mantra mixed with Occam’s Razor’s “the simplest solution is usually the best one.” The real estate market is in awful shape due to banks not making loans to people so they can buy houses. When there are no buyers, there can’t be any sellers. When will this stalemate end? Well, let’s look at trends. The reality for banks for the next one to two years will be that they take on less risk; this means more government regulation, higher down payment requirements, and higher credit score requirements (upward trend). The reality for aspiring home buyers is that they are riskier on paper with lower employment rates, lower credit scores, and less money to put down (downward trend). These two trains need to meet for the market to come back, and right now, they are on tracks headed in different directions; as they continue to move farther apart, they are forming a big (and growing) gap of sales inactivity.

So when will the real estate market be back? Who knows? Personally, I would “read the signs” by taking advice from the London Tube- “Mind the (widening) Gap!