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I have remained quiet on the issue for to long, I and am starting to think its time to take the leap and throw in my thoughts on the state of the world.

First off watch this video from 4:08 - 5:00

Yeah its kind of like that….Now before you run off and think I am just going to go and rant about how the economy is strong and we just need to relax hear me out.

Considering all this irrational behavior over the past few weeks, when you step back and take a hard look at it it all seems rather well… sudden. I know we have been brewing in our own filth for some time now but there really should not have been anything that caused panic. From what I see we actually started climbing out of this mess 4 months ago. If you believe (like everyone keeps saying) that the housing crunch is at the core of this mess, than it should matter that at least in California we have started to see declines in inventory. And in Sacramento those have been pretty drastic. In January we had 14 months of unsold inventory….Today we have 4 months.

Now I need to step back and put my opinion in perspective for you. I am not here to try and calm you so that you will come over and buy and LJ Urban house (fear of this belief is part of the reason I have remained silent) I really don’t care if you come or not. We have sold out the first phase and already have most of the -just started last week- second phase sold. So please believe me when I say that I have no hidden agenda in this post. There I said it and just have to leave it at that and trust that you will make up your own mind on the issue…

Ok so where were we? Oh yeah inventory. Its agreed that we should have never climbed to the heights that we did in housing values. The mindset was all messed up and things were not going down the right path. Its never the right idea to take something such as your home (which takes you 30 years to pay off) and think its a “short term investment” its in my mind exactly that mindset that has gotten us into this mess. We forgot that we needed to actually work for our profit instead of just sitting by and watching things rise in value. I am as guilty as the next guy of taking the wrong approach on that one.

Again back to the issue (sorry) inventory has been dropping and prices have leveled off and in some areas actually rose slightly at the end of summer. I believed and still do that we were actually at the tail end of the housing bust and needed only to hang on for a few more months as winter took its usual toll on things. But spring I believed would bring out the singing birds and we would have put the deep dark depression of the low side of a out of touch with reality mindset behind us.

Then there were a few little announcements and a vote by the house a few weeks ago and we all of a sudden found ourselves in a “real” mess. Everything that was said about the market and its volatilty came true but only after it was “prophisied” by the president and FED officials.

Think about this for a second…When something looses value where does that money go? Does it really just evaporate into thin air?

I don’t think it actually does. What really happens is it hides for a while waiting to come back later.  So when all this value loosing starts to take place what really is happening is its going away and often being given to another person who is willing (and able) to wait it out and see it all come back.

Look with me for a second at the Google Stock. Over the last year it has lost 44% of its value… Hmm. But Google has only been earning more and more money over that same period and hiring although seemingly aggressive has been extremely low compared to revenue and profits. So one of two things are happening, either the value we see today is the “real” value and we never should have been as high as we were or today we have irrational behavior driving it down and it will one day be back up to where it should be.

Alright I will get to my point.

Find and buy true and lasting value in whatever you buy in whatever market you find yourself in. Learn to ignore the noise outside and seek out the fundamentals. This advice will take you through any market and any panic-now phase that comes your way. Whether it’s a stock or a house or simply flowers for your wife buy for value not because everyone else is doing it.

I have to admit that part of my reason for digging into this is that I am getting ready for next week. On Wednesday I have to speak on a panel at the Business Journal Early Bird Economic Forecast and I am a little nervous that I will not know what to say. Or even if I do know what to say it’s going to come out like a stream of muddy murky water. So I figure if I practice on your first I won’t be so choppy sitting in front of all those people. But knowing me and my inability to speak in front of crowds its not going to help… I am just going to do what I always do… choke up and add extra “um” and “uh” filler words while I try and figure out what to say. Oh well. Some things never change.

In part 2 I will explore how all this has affected us at LJ Urban and what we are doing about it. And in part 3 I am going to look at how and when we might be able to climb out of this.

Levi