RIGONOMICS:

Bailouts, bankruptcies, recession, foreclosures and layoffs; the news we are getting about the economy makes it look like the world as we know it is about to end.

What’s happening in the economy is what has always happened to some extent or another. The economy goes through up-and-down cycles, expansion and recession. No matter what you are being told by the brain trusts in Washington, there is no way to stop these cycles. Remember that this downward cycle will end, and expansion will start.

The question constantly being asked is: When are we going to hit bottom? This may not be true in the rest of the country, but in Orange County we may not be at the bottom, but we can see it from here. That’s not just me talking. That’s also what you read between the lines of Chapman University’s annual economic forecast. Seeing that the county was in recession before most of the country, it is logical that we would be one of the first out of the recession. We not only had a real estate bust from the sub-prime housing bubble, we also lost tens of thousands of jobs here because the country’s sub-prime industry was headquartered here.

While last year at this time the number of homes sold in Orange County was down 30% from the previous year, home sales are up 94% from last year. The reason for the increase is Supply and Demand 101. A lot more people want homes this year, when the median sale price is $480,000, than they did last year, when the median price was $687,000. Unlike the rest of the country, where 50% of all home sales are foreclosures, in Orange County only 37% are. That means that 63% of all sales are being done by willing buyers and sellers. Buyers who pay $480,000 for a house have more disposable income for home improvements, furniture and a new car than the last owner who paid $687,000.

Though foreclosure may be personally painful in the short run, it is the best thing we can do to get the economy going again. Having the federal government try to bail out people who could not afford the home in the first place is the last thing you want to do. This restructuring of the family balance sheet is the best thing that can happen for each individual family and the economy.

Just like I told you four months ago that gas prices would be coming down, I am telling you now that we are looking at the bottom of median home prices.

Why? Because homes are now priced at where they were in 2004, before the “Ninja Loans” were popular: no income, no job, no assets. Homes are actually being bought by families that want to own a home in a community, not by some flipper who just wants to make a buck.

In fact, the economists at National City Economics who have been doing a quarterly report showing 370 metropolitan areas in the U.S. show that the third quarter of 2008 Orange County median house prices were 13.2% undervalued based on several factors, including median household income. In the third quarter of 2005, the same economists said we were 33.8% overvalued based on the same factors. They were right.

Three years ago people thought homes would continue to go up in price with no end in sight. Now, those same folks think home prices will go down with no end in sight. Bottom line, the median-priced homes in Orange County did not double in value from what they were in 2004, and they will not be worth 50% less then they were in 2004. We are at the bottom.

With the Obama administration looking to do a $500-billion stimulus plan, Fed Chairman Ben Bernanke looking to push long-term interest rates down to 4.5% and gas at $1.69 per gallon, this economy is set to pull out of its dive. It will just take two more quarters.

Now here is a formula that will get all of us out of this recession sooner: First, if you have a job, be grateful. Unless you work for a bankruptcy lawyer, your employer is working hard to keep you in a job. They keep you in a job by being profitable. So help them be profitable. I know that for some of you that means working a lot harder because you may already be short-staffed due to a co-worker who was laid off. Suck it up, smile and do the work. The best way for your employer to hire back your co-workers is if they are making money. Help them do just that. Make that extra sales call before lunch, clear one more file off your desk, make an extra phone call to answer the customer’s question. Get that project finished faster. All these things improve productivity, and it is productivity that will pull us all out the recession sooner.

Bottom line, do not panic. Everything is going to be OK. If we all pull together, we will get to the other side of this recession sooner.

JIM RIGHEIMER is a Costa Mesa planning commissioner, a local developer and a GOP activist. He may be reached at [email protected].