Kona Kohala Blog

The real estate news today is like statistics in that you can pretty much look at the data and have it support whatever you want to believe.  I'll get the politics out of the way right now by saying the administration is now grasping at straws and not being very honest about the straws they're grasping.  They made a big deal out of the 3.5% increase in the GDP saying that indicates that everything is on the mend.

The GDP is made up of three components; consumer spending (almost 70% of GDP), business investments and government spending.  All reports show consumer spending is down, so much so the government is encouraging people to quit saving and start spending.  There has been no business investment since most companies are still laying people off, loans are hard to get and why spend money on capital improvements when no one is buying?  That leaves government spending to account for the increase.  The Cash for Clunkers and First Time Homebuyers credit account for just about all the 3.5% increase so really, our booming GDP is nothing more than the country going deeper into debt.  Sorry Mr. President, it's not working!

The much touted recovery graph looks like an over pressurized can of crazy string gone mad.  Depending on where you look in Hawaii county you can find growth in sales, in dollar volume, and in median price or, any combination of the above.  October shows what appears to be an improvement in real estate in general with all indicators moving up.  There are some downs, median price in South Kohala and North and South Kona Single Family Residences (SFR's) are all down by varying amounts.  The number of sales and dollar volume is up in those areas though, so what's happening?  Maybe people are taking advantage of the low prices, low interest rates and large inventories.  If that's true, median price should start up very soon, maybe next month so we'll have to wait and see.

The problem, in my mind, remains unemployment.  Those in the know predict continued rises in unemployment numbers through next year.  How can we have a recovery with more and more people out of work?  I'm not one of the big brains working to fix this but it seems that until people go back to work consumer spending (remember the 70% of GDP) can't increase.  Until people start buying again, especially durable goods, business has no reason and no money to invest in purchasing new equipment or hiring new employees.  That leaves government spending to get us kick started.  The problem is the approximate $1.4 billion of debt we're carrying.  Pretty soon, Made in America is going to be what Made in Japan was in the 50's and 60's, cheap junk.  All that debt is driving down the value of the dollar which may help exports in the short run but how about a long term plan?  How is that going to improve our economy?

The only way to get people back to work is to make it advantageous for businesses to begin investing again.  The government needs to reduce taxes and red tape on business.  Unions need to back off, maybe cut down to size like some of the big companies the gov's going to break up.  We can't expect to compete on the world market place with the highest cost of goods in the world.  Look what's happened to those countries that tried, France (now there's an economic powerhouse), Germany, the Netherlands and all the others with socialized governments.  It's good to gather golden eggs but at some point you have to feed the goose or no more output.  I guess I wasn't done with the politics afterall.