"To everything there is a season, and a time to every purpose under the heaven." —Ecclesiastes
NOTE the changes around us and feel the pulse of the city. For years, we decried the gridlock of our early morning and early evening commute in Los Angeles, as we navigated the rivers of this megalopolis to get to and from work. We complained of long lines everywhere during zero hour. Too many crowds. Too much going on.
These days, when well over half a million workers are out of jobs nationwide, those days in retrospect, when we jostled with the multitudes, were in fact, the good old days of recent memory. The picture is becoming grimmer each day. We watch with trepidation and mounting concern. In some areas, the traffic seems lighter now and there are shorter lines in the stores. Shopping malls are cutting their hours of operation and companies, instead of closing down, are cutting expenses by having their employees take time off without pay. There are more people buying their bread in the outlet stores. There are more people cooking their dinner than eating out. Salary cuts across the board have become a given. CEOs have decided to freeze all hiring. Retail outlets are closing quietly and with those closures, we can only imagine the lives of those who are suddenly without a source of income. Grown children are moving back to their parents’ house. Couples on the edge of divorcing are rethinking their positions, knowing that any move they make will impact their pocketbooks. Now is not the time to make a career change. More day laborers stand on street corners around Home Depot begging for jobs to tide them over for the day. The misery index is on the rise. But we’ve been here before and we will get out of this again.
Behind the cold numbers are living, breathing human beings with families to feed and raise. Cashiers in checkout lines have more time to twiddle with their thumbs in-between transactions. Beauty salon operators bank on their regulars who now just want basic haircuts and none of the other froufrou frills. Movie watching will decrease while cheaper home entertainment will get a boost. The upside is that families will be closer together, depending more on one another. Perhaps, we will learn to begin saving before the rainy days come. And there are more people discovering their spirituality and flocking to churches. It’s a world turned upside down when people down on their luck, deliberately commit crimes so they can be imprisoned, their basic needs for food and shelter to be provided by the prison system.
Perhaps, this is a season that was long in coming. Despite 9/11, we have had a good run. We know from Ecclesiastes that there is a season for everything under heaven. Our naïve understanding of the changes in the seasons of our lives makes us shortsighted and ill-prepared when the seasons do change.
But lest we forget, it’s not all that bleak for all.
People still have to eat and it may very well be that supermarkets, particularly those which offer price and savings and value as their selling points will grow. Restaurants and food joints, if they are not too hip, marginal and high-end, may be able to ride this downturn more than others. Walmart and others who offer more bang for the buck will thrive even more.
The repoman is thriving. It is his business to repossess cars at the behest of finance companies from owners who have been delinquent in their payments. Some lawyers are shifting gears and offering loan modification services or foreclosure defense sensing that a hefty part of the government stimulus package will go to millions who are still at risk of losing their homes to foreclosures. There are those who see opportunity in all these and will adjust accordingly or be mowed down completely. We will reinvent and adapt.
Real estate auction houses are making a killing nationwide, working with the banks and commissioned salespersons to liquidate and mop up a staggering amount of housing inventory from an unprecedented number of foreclosures and overbuilding. These auction houses, foremost among which are REDC and Hudson and Marshall, collects 5% of the winning bid or the purchase price as their fee for facilitating the transaction.
There are so called expert predictions that real estate prices which have plummeted by roughly 36% of value in 2008 will still have a long way to go down by another double digit figure in the years ahead. No one knows exactly when things will bottom out but it will. What is certain is that the tremendous run-up in real estate prices from 2001 till the last quarter of 2007 followed a steep curve and having reached its peak in 2007 will continue to fall over the next few years. It will be a buyers’ market. It was an unprecedented phenomenon and few among government regulators and economists blew the whistle on the overheated real estate market. There were short-term, hefty profits to be made at the time and everyone, individuals and institutions, got in on the act, fueled by the human emotions of fear and greed. Over and over again in the last few centuries, FEAR AND GREED have driven the markets and these will continue to do so as long as our DNA wiring remains the same. And over and over again, as we move to recovery, the lessons will be forgotten.
For things to normalize, experts say real estate prices must come down to a sustainable level. Banks have to go back to the basics in lending to only those that can truly afford it — what used to be a ratio of 22% to no more than 33% of gross income. Integrity and common sense among the captains of industry in the financial markets must reign supreme again. Government must back off, or at the very least, rethink and redraw its policy of socialized housing, which forced banks to lend to those who could not afford it thereby causing the subprime mortgage mess.
For a consumer society, this downturn can have disastrous results. If those who are able to influence this trend, do not have the courage and the moxie to undertake course correction immediately, all dire predictions will become a self-fulfilling prophecy.
Or we can bank on the certainty that there is an ebb and flow, a night and day to life. There is the principle of "Horror Vacui" or that nature abhors a vacuum. There will be a new season that will come out of this, perhaps on the proviso, that we learn something from this.
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( Published on March 11, 2009 in Asian Journal Los Angeles p. B2 )
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