According to Wikipedia, the second best web site on the Internet next to this one, the fellow who called economics “The Dismal Science” was Thomas Carlyle, and he coined that phrase in response to the theories of Robert Malthus.  That’s the same Robert Malthus whose work on the limits of the food supply compared to the increase in population growth was one of the pillar’s of Darwin’s theory of Natural Selection.

See what you can learn on a real estate web site?

I don’t know about economics being intrinsically dismal, but I do suspect that dismal news helps us to sustain a dismal market, just as good news helps us to sustain a strong market.  People tend to operate off of their own perceptions, rather than reality.

Example:  on December 15, 2005, Freddie Mac reported that for that week the average mortgage rate for a 30 year fixed loan was 6.30% at .5 point.  That month the average home sold in Sacramento County for $246.19 per square foot.  Under those conditions, 1,480 buyers purchased a home in Sacramento County.

Now it’s almost the same time of year in 2007.  According to the latest Freddie Mac survey, interest is at 6.11% at .5 point.  The average price per square foot is $184.05.  Yet based on current projections, it’s looking like less than 600 homes will sell this December.  Maybe it’ll get up to 700 or so, but to give you an idea, as of now it’s December 14th and 276 units have closed in Sacramento County.

“So we keep waiting
(waiting)
Waiting on the world to change
We keep on waiting
(waiting)
Waiting on the world to change”

– John Mayer

The Joke About the Airplane

A four engine jet loses an engine.  The pilot comes over the loudspeaker and says “Attention ladies and gentlemen, please don’t be alarmed, but we’ve shut down one of our engines as a precaution.  Our flight will be delayed 20 minutes.”

Later a second engine goes out, and a third, and each time the pilot announces a longer delay.

Alarmed, one passenger wonders out loud what will happen if the last engine fails?

“In that case”, says the stewardess, “we’ll be up here all day.”

What Does the Joke About the Airplane Have to Do With It?

$246.19 per square foot:  1,480 buyers buy homes

$184.05 per square foot:  less than 700 buyers buy homes

Oh my gosh, what will happen if we get down to $10.00 per square foot?

When that happens, no one will buy anything.

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