Doom and gloom abound in the markets

(Brendan)

It doesn't matter whether one is talking about the stock markets, credit markets, or housing markets, doom and gloom is everywhere these days. It certainly would give pause to anyone planning to, oh I don't know, sell and build a home next year. It can be mind-boggling trying to keep track of all the bad news, and sometimes good news, that may affect our particular situation in the coming months.

On the bad side, for instance, since only a year ago, the Dow Jones Industrial Average is down over 20%:
Any money invested in stocks as a vehicle for saving for home construction could be taking a serious hit.

But, on the good side, we don't have any exposure to stocks in our savings for the home, with the exception of some stock in the company I work for, which is actually up a couple percentage points for the year to date.

On the bad side, the subprime loan crisis (and even worse, the complete collapse of parts of the mortgage banking sector in recent days) has cause credit markets to tighten considerably, even to the point that people with good credit are finding it much harder to be approved for a loan (or there are much stricter loan terms). As evidence for this disconcerting trend, this article from the Minneapolis Star Tribune: "Get ready for a mortgage maze". The practical affect for us is that it could make getting a construction loan very interesting.

But on the good side, material costs for home construction have come down sharply in a number of areas, making the cost for building our home less with each passing day of this downturn (and thus also the potential size of a construction loan). Evidence for this from CNNMoney.com: "Build your dream house now".
Also on the good side in terms of construction costs, a potential decrease in labor cost. We are putting our home project up for competitive bid, and have lined up 4 (possibly 5) general contractors/builders to bid on our project. This is the way to get the best possible price on construction. And suffice it to say, whether the contractors let on or not, these guys need the work badly and competition for our project will be fierce (driving our cost lower). And the Minneapolis Star Tribune supports this: "Home building activity at a crawl in Twin Cities".

On the bad side, home values across the country have declined in the past few years, and haven't seemed to hit bottom. This means that selling our home could be very difficult, and that our selling price may have to come down significantly to ensure our house does sell in a timely fashion. Once sold, the amount of equity in our current home will be less than we had hoped, meaning less to put towards our next home.

But on the good side, anecdotally I know a number of people that have recently sold homes within weeks (not months) of putting them on the market in the Twin Cities, and another article was just released today that helped validate this trend. From the Minneapolis-St. Paul Business Journal: "Minneapolis-St. Paul home market improves slightly in July". Minneapolis lead the nation during the last month with a modest increase in home price index. A quote:

The Standard & Poor’s/Case-Shiller home price index, which tracks prices in 20 metro areas around the nation, reported an index level of 143.4 for the Minneapolis area in July, up 1.3 percent from June. (The index is based off of home prices in January 2000, so a rating of 143 translates to a 43 percent appreciation rate since then).

The index value for July is still down 13.1 percent from the prior year (when the value was 164.9). But the Minneapolis market was one of the areas of strength during the most recent period.

The next best market was Denver, where the index value rose 0.8 percent in July, and the survey found that the Minneapolis area, along with Atlanta, Boston, Dallas and Denver, had reported improvements for at least the past three months.

So what does all this mean? It means we don't have a clue how things will play out for our home project in the coming months, but we do know two things:

1) There are so many people out that who have serious problems, involving losing their jobs, or homes, or worse, and our concerns are nothing compared to theirs, and we are so very appreciative of all of the gifts that God has given to us. We pray for all those who are suffering.

2) We want God's will to be done, and we are quite comfortable handing over complete control to Him, knowing that the Lord works all things together for the good of those who love Him.

St. Joseph, pray for us!