The spin doesn’t resonate this time

A recent Boston Globe headline read, “Qualified borrowers face credit squeeze,” indicating that low rates remain elusive despite drastic Fed action. On the same day, a New Hampshire daily, attempting to put a less dire spin on a very dire real estate situation read, “A market in flux.” One local was quoted as saying, when referring to the fact housing starts are off, “That’s a good thing because we can sell off inventory and let the market stabilize.” Sell to whom?

I sincerely hope she is right, but I just don’t share her optimism. We talk about commercial growth in New Hampshire, but we frequently overlook the fact that when retail stores move from one mall into another without any backfilling, the net additional growth is zero. Like musical chairs, when the music stops, what does the growth look like?

The fact is, there is no immediate “silver lining” in this mess — the very worst I have experienced in my lifetime. The fact is, we are in a brutal economic situation, and the credit crunch (coupled with the high cost of energy) has everything to do with it. A squeeze in which even qualified buyers now face a credit squeeze is just the latest indication that the squeeze is deepening and further depressing the real estate market and the economy.

In a classic governmental interventionist-vs.-free market faceoff, some hope for massive bailouts while others argue this would be a disastrous message to the globe that must be avoided at all costs. These assert that if we allow the Fed and government to bail out American capitalism, we will lose the trust of the world’s financial community for a decade or more — perhaps like the lost decade that occurred in Japan.

Acknowledging that the pain will be great, they say the pain of admitting that American capitalism has failed would be even greater.

Some storms you can ride out — in others, you need to find a safe harbor. Sometimes the best action is no action. If you are in the stock market, limping into a safe harbor could spare you considerable agony. Attempting to ride this one out might add to it considerably — depending, of course, on the nature of your holdings. But that’s just my opinion, and I strongly advise people to seek counsel from their own personal brokers or financial planners.

But when it comes to real estate (whether residential or commercial), listening to the self-serving spin of Realtors can be risky. Some assume that normal growth patterns will continue throughout the state, even within a context of recently opened big box stores.

Sure, these big stores continue to open in some geographic markets, but few realize how long ago the decisions were made to pull the trigger to build or open the store. The grand openings that take place today could well be the culminations of final decisions made as long ago as three years. If the decision-makers knew then what they know today, would they be making the same decisions? One can only guess.

Those who are financeable and have dry powder and a strong balance sheet should not have much of a problem, but in my opinion the abrupt slowdown on any marginal deals and the overall negative state of the economy makes an assumption that normal growth patterns will continue to be suspect at best. Some geographic regions will hold up better than others. Hopefully, New Hampshire will be one of them.

Ted Sares, a semi-retired private investor, lives in North Conway.

Categories: Opinion