Mood of the Market
Mood of the Market
We Americans are not great with stillness. Most of us can do some physical stillness (especially while we sleep or watch television!) but when it comes to mental stillness, it's a whole different ballgame.
Elizabeth Gilbert's book, "Eat, Pray, Love," has more than one hilarious/tragic passage about the mental warfare she engaged in -- with herself! -- while trying to simply sit still in meditation while visiting an ashram in India.
As an avid yoga practitioner, I'm always amazed at how few people can lie still on their mats for the closing "savasana," or "corpse pose." It should be the easiest posture to do -- you just lie, super-still, on your mat, arms at your side. End of instructions.
Nevertheless, even after the most rigorous, 90-minute practice of the hottest, sweatiest Bikram yoga session -- even after the teacher advising everyone that this stillness is the most beneficial "pose" of them all, because it allows all the freshly detoxed and oxygenated blood to flow through our bodies' blood vessels; and even after she literally pleads with the class to be quiet and still so as not to disturb their neighbors -- it's like they just can't help it.
A whopping 30 seconds of stillness later, people start twitching their toes, wiping their eyes and rolling up their mats.
And so it is with the typically American approach to financial matters. In the face of any discomfort at all, Americans have a strong need to act -- to do something, anything, rather than just sitting still. Even when sitting still is smarter.
This is exactly why day-trading -- and even obsessively watching the ticker ups-and-downs of your stock market investments -- is discouraged for all but the savviest of investors. Human nature is to do something, despite the fact that sitting still in a down market may be the winning strategy, more often than not.
In the context of homeownership and depressed home values, Americans are tired of sitting still and waiting. They're ready to do something, whether that something makes sense or not! I'm seeing this need to do something, at any cost, manifest itself in homeowner questions and trending topics at two extremes of the do-something spectrum.
I'm still seeing many, many homeowner inquiries about walking away from their devalued homes. On the other end, there are many homeowners interested in doing work to improve and remodel their home, both to increase its value and their comfort in their tenure there (which will be longer-than-planned, due to the market).
Don't get me wrong: these actions may make sense for a given homeowner, depending on the situation. Over-improving your home is certainly a danger, but not an overly scary one, given the frugal tendencies of the average American consumer right now and lenders' chokehold on home improvement money and lines of credit. But I suspect that the uber-extreme act of walking away poses a much greater danger for a good chunk of the homeowners who do it.
If your mortgage payment isn't adjusting, your income isn't adjusting, you planned to be in the home for 30 years when you bought it five years ago and your home is down 10 percent from its peak value -- walking away might be an overreaction that multiplies your problems rather than solving them. It's wise to remain conscious and aware of market dynamics and your home's value, but to fixate on it and react in the extreme is not so wise.
Fact is, in last month's Case-Shiller report, 18 of 20 metro areas were starting to see an uptick in values. Unemployment figures and the hangover from the tax credit's expiration still pose definite threats to real estate recovery. But things change very rapidly in this market, and it would be a shame to regret having locked yourself in by walking away just before the market turned.
My advice to homeowners in these situations reminds me of how my mother used to handle my kids when they were 3- and 4-year-old little boys. They would be running around her condo like "they were raised by bears" (her words) until she issued her standard order: "control your body parts." That would generally slow them down.
Then, she'd give them each a piece of Red Hots candy, which she had indoctrinated them to believe was, in fact, a "chill pill." They would stop their gyrations and sit right down on the floor, wind gone completely out of their sails in an instant from the placebo effect of the chill pills they held in their mouths.
So, homeowners, control your body parts. Pay attention, stay aware, be conscious of what's going on with the real estate market in general and your home's value, in particular. But try not to react too soon, because often your instant reaction will be an overreaction. Like with hot yoga: let the sweat drip while you gather the information you need to chart your moves wisely and see where the market will go.
A little sweat won't hurt you.
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