Tuesday, November 6, 2012

election day - how will the results affect the Phoenix real estate market?

election day - how will the results affect the Phoenix real estate market?


I have smart friends voting red, and I have smart friends who vote blue. My question is, does the winner of today's election matter, in terms of the Phoenix real estate market?

In terms of social issues and the parties' overriding directions, of course it matters. Taxation, pro-life vs pro-choice, military, health care, size of government, business regulation... The winner of today's election will get to move the country in the direction of his (and his party's) beliefs.

But the local real estate market? Not so much, at least not directly.

It's all about the budget deficit

How dysfunctional does a family have to be for the kids, when asked about Mom and Dad, respond "They both break all their promises - all we really care about is that one of them remembers to pay the bills."

We've been through a Great Recession - the worst economic times most of us has ever seen in our lifetime. And while things aren't back to great yet, they're better than they were and seem to be getting better each quarter.

However, we still haven't dealt with our runaway deficits. This will be the most important job of our president over the next couple years - regardless of who that president is.

Plan, propose, compromise, discuss, be a leader, compromise some more, remove pride and party lines from the discussion.. Do these things, and show the rest of the world we have a very real plan in place for reducing our debt, and our recovery will continue unabated. Everybody wins, on both sides of the aisle.

Play party politics, blame the other guy, keep your pork barrels, kick the can down the road, and prepare good sound bites for the next election, and we're all in big trouble.

At some point in the future - maybe 2014 or 2015, we're going to issue Treasury Notes, and the bond market is going to say "We're not sure you'll be able to pay us back without renegotiating, so we want more return for our risk - we'll take these notes at 7%, rather than 0.5%."

Ask Greece what happens next. (or Ireland. or Portugal. or Spain, Italy, or France.) It isn't pretty. One day mortgages are 3.5%; the next they're at 8.5% and rising.

Yeah, that'll put a stop to our little recovery. The payment on a $200,000 house goes from $1,075 to $1,700, and suddenly people aren't willing (or able) to pay $200,000 anymore. Either the market stalls, or the market crashes. In the meantime, businesses feel the same cash crunch from lack of cheap credit, so we go back to hiring freezes and even more layoffs. Now unemployment rises, from our already too high levels. Throw in another round of foreclosures and fewer people who can afford to buy homes, and we've got another decade in front of us which will be worse than the last 5 years we just went through.

Who needs to Win?

So who's going to be the better president, given all of the above? I don't know.

Our incumbent hasn't shown me as much conviction and passion as I think it's going to take. On the other hand, he won't have to worry about re-election in his second term. This might give him the flexibility needed to make waves while doing important work.

The challenger talks a good game and looks good on television. But then again, so does every newly elected president. (Our incumbent looked great four years ago!)

I'm not telling you who to vote for, and I'm not telling you who I'm voting for. I'm just saying the winner better make a balanced budget his top priority.

Bottom Line

How dysfunctional does a family have to be for the kids, when asked about Mom and Dad, respond "They both break all their promises - all we really care about is that one of them remembers to pay the bills."

It doesn't matter to me who wins this election, as long as they're up to the task of balancing our budget. If either party gets stubborn and decides to play politics as usual, we're all going to lose, big-time.

* Editor's note - this is an op ed piece - my opinions are mine alone. You're welcome to agree or disagree in the comments below, but please don't turn this into a political flame-throwing match.

-Chris Butterworth

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