New Jersey Appraisal Blog

As was discussed in part one of Real Estate and the Economy the real estate market and economy mirror one another. So we know our economy is doing horrible on a national level and we also know our real estate market isn’t doing great either. So is there light at the end of the tunnel? Will things ever get better? If so, then when?

To answer the above question which many Americans have we must look in two directions, the past and the future. It’s funny because so often people are reluctant to look into the past for answers to questions they have today. But like many wise men say history repeats itself, this quote proves it self to be true time and time again. Now on the contrary history does not repeat in an identical manner, obviously times change and so do circumstances. The quote is more geared toward the theory that mistakes made in the past or events which took place will come back round in the future, even if they come in a different form. This is why it is not only important to know history, in this case economic history, but to understand it as well. If you know history and understand it, including the mistakes made, as well as good decisions made it will enable you to live your life wiser and make better decisions which will positively impact your financial future. To explain the entire history of the economy would be way to long for a blog post. However I did come across a video which briefly sums up some of the main reasons for our current economic conditions.

If we continue to have an unhealthy economy our real estate market wont follow to far behind. People will always need a place to live so real estate will continue to sell, but what people can afford will change. The ever so weakening dollar and rising costs of living are forcing Americans into a recession. Inflation is rising, but what about the annual incomes of Americans? Many people are forced to pay more to live when they are making less. Our currency used to be backed up by gold, which was done away with by the federal reserve in 1933. Basically after this point money was printed at the discretion of the federal reserve (not a good idea). So ultimately they control the supply of money.  So is there light at the end of the tunnel? Will things ever get better? If so, then when?

metaphorically speaking at this point and time we are stuck in a major traffic jam inside the tunnel which is caused by a couple of accidents, broken down cars, and maybe even some other things we can’t even see at this point. Politics influence the economy more then any other force. This has been true throughout history. So in essence many decisions made by high level politicians will indirectly impact the economy which will then impact the real estate market. That being said we can look to current events like the war in Iraq for understanding of why our economy is in shambles. We can also look at the world economy that our planet is moving closer toward everyday. There has been much speculation about the amero which is a theorized economic and monetary union of the three principal countries of North America, namely Canada, the United States, and Mexico. Implementation would probably involve the three countries giving up their current currency units (Canadian dollar, U.S. dollar, and Mexican pesos) and adopting a new one, created specifically for this purpose. Although the government has not announced any official plan for the amero many signs point to this becoming a reality in the near future.

This was done throughout Europe with the Euro which was implemented in 1992. The Euro has since grown into one of the most valuable currencies in the world. But this did not happen over night. Like any major transition there were many problems to address along the way. So is the United State headed down a similar road? Nothing is official but we must speculate.

Regards, of whether the amero is in our foreseeable future or not one thing is for sure, the government must take steps and make decisions in the near future to positively impact our economic future. I would not expect however our economic problems to be fixed overnight. History shows that it takes years to recover from an economic crisis like the one we are in. At this time I wouldn’t give a specific date to when our economy will become healthy, but I will say this it will get worse before it gets better. How much worse depends on the influences I discussed. The advice I can give is to keep abreast with what is going on with our economy as well as our country. Money can be made in a good market as well as a bad market, it is always imperative to know your market and anticipate what is to come.