The Pendulum Swings Too Much

By Steve Getsiv, 01/25/09

I've got a hard time writing about products in such crappy economic times. I'm frustrated with so many things going on in our economy. As one of my banker friends puts it, "the pendulum swung too far in one direction (loose credit standards), and now it has swung the other direction (tight credit standards)". Is it right that just a few years ago banks would give 90-95% loans classified as "no doc", ie. no proof of income needed; and now you can't even get a competitively priced 80% loan without a credit score of 740 and two appraisals?

We sell high end flooring and decking products - some of the most beautiful stuff on earth. These products are most popular in expensive homes, say $600K and up. Most people need a jumbo loan to afford a house like that - and jumbo loans are even more difficult to get than smaller loans. Jumbos also are way more expensive today - most consumers that can afford them know that it would be stupid to pay the typical bank interest rate for a jumbo loan today. So instead of buying or refinancing, they just wait... sitting on the sidelines and hoping that real estate values once again rise steadily. For most consumers that use our products, the key to building equity and net worth is rising real estate values.

So, you're one of the few who can still afford a new hardwood floor in spite of the crappy economy? Prices are certainly down a bit since mid 2008. We have plenty of awesome products available - and certainly not many shortages. Consider something like Ipe or Santos Mahogany; both incredibly beautiful and durable.

Let's all hope for some quick action by our government to put the pendulum back in the center and leave it there. We need a realistic and rational approach to banking and credit. Wall Street got drunk and now they've gone cold turkey; personally, I think a couple glasses of wine each day is a nice balance.

By Steve Getsiv, 01/25/09

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