Every morning I get up make my coffee and then sit down and go through all the financial websites to see what is going on in the world.  What I have realized is all the bad news that is coming out about the economy centers around the housing market 

Like a lesson in the conjunction of Latin Verbs that Sister Hell on Wheels would pound into my 15 year old head in high school the bad news in the housing market is force feed to us every waking moment.  One report claims that 1 in 4 home owners are under water in their home loans.  Another claim the housing market is awash in foreclosures, and another warns us of the coming commercial real estate meltdown.   Ah duh this is the same crap we have heard for the last year.  Where were these people 2 to 3 years ago when we all could have used some of their bad news predictions?  All the bad news is in the market it is not relavent any more.  Now tell Bobby something that we  don’t know.

Ok how about I share this with you.  Did you know that 382 non financial firms in the Standard and Poor’s 500 have reported results for the fourth quarter and are now sitting on 932 billion dollars?  That is billion with a “B”.  What these companies have done is during the down turn they cut costs and capital spending looking to survive the storm.  What are these companies doing now?  They are coming out of their caves and are looking to spend.  Let’s face it a trillion dollars sitting in a bank account is not doing anyone any good.  That money needs to be put back into the economy.   Some of these companies have increased dividends and bought back stock but this signals to the market that they don’t have a better use for their cash.  Stockholders want value and growth.

What is happening now is companies are using their cash to buy other companies.  Bank of New York just spent 2.3 billion for PNC Financial Services, Diamond Foods Inc’s 615 million purchases of Kettle Foods, Air Products offer of 5.12 billion for Airgas Inc.   These are just a few examples of how these companies see positive signs where the economy is going.  Capital for expansion is more readily available and this capital is cheap.  Instead of using what many CEO’s consider their under valued stock to finance a merger these companies have leveraged their cash and the availability of cheap capital to expand through purchases and mergers.  Their view of the economy is that their stock is undervalued and when you compare that to the cost of cash and financing it is pretty easy decision to make, use the cash.

So what does this mean to the average home buyer?  Well 382 CEO’s are out looking to buy.  The reason they are buying is the same reason you should be buying as well.  Reason number 1: the market is at the bottom, in some metro areas the bottom is slipping away.  Reason number 2: interest rates have never been lower.  Everyone will agree that rates will not stay at these levels for long.  30 year mortgages have slipped under 5 percent once again. Reason number 3: waiting for prices to drop.  Home prices are at 2004  levels.  We have seen prices fall almost 5% a year since 2006. Will prices fall further I don’t think so. Why you ask? Because of, Reason number 4 the Economy is Improving.

Thanks for reading Morris Plains Homes   NJ Blog.   Here is today’s Quote   “Stay strong eat right and go for the gold”  John Sittmann

PS this just in    The Unemployment Numbers for February are in.   The  Consensus is that had we not been “snowed in” in February we would have seen a job gain instead of a job loss & this is perceived as a strong economic indicator

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