On bleak economic news, falling home prices, et al...

It's disheartening, without a doubt, reading through grim financial and economic news of the day. The impacts are mostly psychological (not unemployed, not much debt) and not physical, it hits me all the same.

Yesterday, there was news of job loss spreading across the economy in US and worldwide, with 75,000 layoffs already confirmed. Today, there's news of annualized home value dropped more than 18% in Nov 2008, compared to a year earlier.

It comes as no surprise, as the condo that we sold in June 2006 (pretty much at the top of the market before it softens from the second half of 2006, then came crashing down and still falling) had its price increased by three-fold in the 10 years when we owned it. Granted that the condo was in a nice, desirable, sought-after neighborhood, I'm not sure if I would pay $360k+ to buy a one-bedroom with less than 500 square feet. And while I love that condo, rentals over the same 10-year period definitely would not have justified that kind of capital gain (of 300%) on that property. The rational side of me still told me that it's simply unsustainable. So, when we were nudged to sell (for more than a few years) by the family living downstairs, we eventually relented and sold. Oftentimes, I wonder how they're doing, for a family of four, to be carrying 4-5 mortgages at the time, albeit having one very good job by the husband.

If our condo had risen some 30% every year since 1997, and it provides any kind of yardstick to measure home prices now which has following 18-25% so far and still falling, I'd say, property prices would still have a long way to go, down south. But the price drop so far has already caused so much pain to the economy, that I'm not sure how it could sustain another 100-150% drop (assuming only half of our 300% rise over the last 10 years were justifiable - totally unscientific, but something whipped out from my head on a whim).

Before the party crashed, it was said in 2005 that Americans have extracted some $1 trillion in home equity value to finance consumer spending. The public worldwide announcements of writedowns and losses by funds and financial institutions, in particular, have already exceeded the $1 trillion mark. And it was said that it could cost a few more trillions in order for Washington to fix the economy (or at least try to get it going). Considering those numbers (however ballpark), and we should realize that Americans have basically eaten into the savings (the fats that had been building up in the past 10 years).

Although we're in decent shape financially, and the property we're in is good, all other investments have lost more than 50% in value, including my 401k. Those 50% loss in my 401k basically wipes out *all* of the gains in the 401k, putting me back to where it would have been, as if I have only contributed only the maximum 401k amount, with no company matching contribution to the total, and no gains to show for in this 401k investment over 10 years. It's like I'm back to square-one, but at least it's not in the negative, unlike alot other poorer souls who lost even more.

But I feel poorer nonetheless. Society is a collective place. When fellow countrymen suffer, we feel some pain. And I feel more anxious too, in this recession, compared to the one in 2000/2001. At least back then, we had two incomes. Now, it's just my income/job, and my husband's business which won't pick up until the economy comes back (and it could take at least a year or two). And we have kids more.

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At times like this, when my anxiety level is high, I feel the need to do something. I have urge to get an extra job. I'm more inclined to do a few more research studies to pick up some free money. I'm starting my advance degree. I'll even sign up to do some tutoring in the university. And I need to re-balance my portfolio. Not that I'm in any panic to sell (which is probably the most foolish thing to do, since panic selling definitely seals the loss), but there are loser- investment that I need to trim.

But I'm hopeful we'll be able to make it better, in the coming year.