Monday, September 15, 2008

Black Monday

As you know, Wall Street is going to hell. How will this affect Downtown LA? Let's hear a quote from Treasury Secretary Hank Paulson (via the NY Times):

Mr. Paulson, whose performance has been impressive this year, made it clear that it would take a while — years, in fact — to get over the current housing and mortgage mess.
“I believe there is a reasonable chance that the biggest part of that housing crisis can be behind us in a number of months. I’m not saying two or three months, but in months as opposed to years. I think we will have housing issues and mortgage issues for years.”

Yikes. And that's just the housing market. There's also all the financial services people who work Downtown and are facing layoffs. And tight credit will keep small businesses from getting loans to open stores downtown.

It's ugly and it's going to get uglier.

Update: Washington Mutual's bond rating has been lowered to junk. It's widely believed that WaMu is going to fail this week or next. They are a huge player in the California real estate market.

Fasten your seatbelts. It's going to be a bumpy ride.


Anonymous said...

Sucks for the economy, but maybe people will actually be able to afford a loft now.

Li said...

Well, yes, lofts will be cheaper for people who have steady jobs, strong credit ratings and enough cash for a 10-20% down payment. This is not a large pool of people.

MB said...

I expect the price of lofts to drop until the pool of people Li mentioned is the same size as the number of available lofts. The prices were only high in the first place because easy and loose credit, as well as "liar loans" and dishonest bankers, loan officers, and underwriters allowed the pool of qualified buyers to become very large.