Satori Alliance | Financial Counseling | Real Estate Investment Products | Financial Guidance Seminars

Economists like to use the term elasticity to refer to price sensitivity, but it’s equally appropriate now because the economy seems to be expanding and contracting like a rubber band held between a nervous child’s fingers.

Item: On June 16^th, the U.S. Department of Housing and Urban Development announced that privately-owned housing starts in May were at a seasonally adjusted annual rate of 593,000, below April but above May of 2009.

Item: On June 23^rd, the U.S. Department of Housing and Urban Development announced that sales of new single-family houses in May 2010 were at a seasonally adjusted annual rate of 300,000, below April and below May 2009.

Item: On June 16^th, BusinessWeek said that economists polled by Thomson Reuters expected the Conference Board’s index of leading economic indicators would fall 0.5 percent in May; it had slipped 0.1 percent in April, the first decline since March 2009.

Item: The following day, the Conference Board announced that its index of leading economic indicators had actually risen 0.4% in May, following no growth in April.

Item: On Monday of this week, CNBC reported that that day’s stock market drop came from concerns about consumer spending, which supplies some 70% of the country’s GDP.

Interest rates are at historic lows. And the latest jobs report isn’t due until Friday. No wonder everyone’s confused about the economy.

This makes me wonder if all this confusion will pass, or are we heading into a time when uncertainty is normal?

I of course look at the economy through the lens of housing. Mortgage underwriting guidelines have undergone tremendous changes thanks to regulatory intervention. Lenders are interpreting the guidelines to protect themselves from violating the new rules. But at the same time, they’re trying to find a way in those guidelines that lets them generate profitability. The government is trying to protect consumers, and the lenders are trying to protect themselves from a recurrence of what we’ve all been through.

The problem is that the economy and the housing market are inextricably linked. When I was in real estate financing, we used to say that the sale of a piece of property pays the salary of some 10,000 people, once the transaction closes. It’s no wonder that consumer spending is dropping - what’s the most logical time to buy new furniture, appliances, and electronics but when you move into a new house?

If this isn’t the “new normal,” then what will trigger a shift back to the familiar? I believe it will be the result of American ingenuity and innovation. It’ll come from the private sector and investors who have no other place to put their money. When the adjustable rate mortgage was invented in the late 1970s, it was in response to astronomically high interest rates. It was a godsend, and nobody questioned the impact. It was an opportunity to sell something.

As we get accustomed to these circumstances, and as distressed properties dissipate and get assimilated back in the mainstream, we will begin to see changes in the way people finance houses. The changes will be small at first, but more and more people will begin to get financing, and they’ll do it in creative ways that don’t look like anything we have now. I’m voting that the confusion will pass.

A few weeks ago, I wrote about a man I called NavyDaddy, a name I took from his e-mail address. He was a naval veteran in his 50s whose wife was expecting twins. Though they were living in Michigan, they were very interested in a property DBNR had in Gary, Indiana, where the wife had family. I wrote that I would continue to NavyDaddy’s story as it progressed.

Frequently in this venture, my initial interactions with a prospect are full of enthusiasm and potential. People who have been frozen out of the housing market for years, realizing an opportunity to finally get equity in a property (even a currently distressed one), are often exuberant in their fantasies. But then the realities of tax forms and income verification and such kick in, and the exuberance fade.

Not so with NavyDaddy. If anything, his enthusiasm grew, even as he struggled through mowing the overgrown lawn … and painting the bedrooms … and fixing the electrical receptacles because the junction boxes were missing. This is a 970-square-foot, 3BR, 1BA house. No garage. A freeway runs along the back fence (in the real estate business, we promote something like this as “no backyard neighbors”). But he loves it. He sent me before-and-after pictures. He sent me pictures of himself doing the work. His delight in creating a home for his family never flagged. A friend of theirs, who also survives on Social Security payments, is going to join them in Gary and help them take care of the twins.

In fact, NavyDaddy’s so excited that he’s getting ambitious. The houses on either side of this property are vacant. One of them has a garage; he’s begun to figure out how he can eventually buy that house too.

Many of us, especially here in Silicon Valley, would look on a 970-square-foot house as cramped and too small to bring up a family. For NavyDaddy and his family, it’s their dream come true.

As many of you know, one of the tenets on which I founded DBNR was to help people who may never have had homes become home owners. I admit it: I have an altruistic streak a mile wide.

But I’m not a philanthropist (not this year, anyway). I’m committed to taking care of my family too. Only a business that makes a profit can survive long enough to help those less fortunate. The two go hand in hand.

That’s why I’m always tickled when the two literally go hand in hand, as they have in what I call our “Chicago Project.” In Chicago, we own a unit in a 20-unit condominium brick building. A second unit is being foreclosed upon by a bank. The other 18 units are owned by an investor with whom I’ve been in contact. I’m not exactly sure what his story is, but I believe he was in the middle of arranging a deal to secure the assets of the entire building when his financing started getting wobbly.

I always say that you never know where your fortune is going to come from. Fortuitously, a second person in Chicago tracked me down when he found our unit on one of several Web sites where I’d posted it. He called our toll-free number and announced that he was looking to acquire all the units in the building: ours, the other guy’s, and the bank’s.

But what do you suppose he wants to do with it? It turns out that he works with an extremely well-connected non-profit organization in Chicago, one that understands the arcane mazes governing getting city and county money for grants. He wants to convert the building into a halfway house for women released from prison. Currently, thanks to urban unemployment rates and Obama’s stimulus plan, he has access to some extraordinarily skilled laborers who’ve signed up with his group to provide low-cost labor to renovate buildings like this one.

It’s a win-win-win. DBNR sells its unit; it gets a finder’s fee for linking the guy with 18 units to the guy who wants the building in toto. A cluster of underemployed people get to work. A stream of female parolees gets housing. An empty building gets revitalized.

I still have to figure out how to connect the guy from the non-profit with the bank that owns the foreclosed 19^th unit, but in the scheme of things, that’s pretty minor. The rest of it, and all those fulfilled motives, makes me smile.

All too often those of us here in Silicon Valley congratulate ourselves for living on the cutting edge of technology. We all have neighbors who work for either companies with household names or unfamiliar start-ups, around whose work there is a great deal of secrecy - until there’s a flashy story in the Wall Street Journal.

Sometimes it can be hard to keep up, which is why every year I attend the day-long technology “boot camp” sponsored by the Silicon Valley Small Business Development Center, part of the U.S. government’s Small Business Administration. For $49, it’s the most cost-effective resource I’ve run across, because I’m sure that it would cost thousands of dollars to learn the same thing at other seminars.

We learned about issues most likely to affect our businesses, such as cloud computing, how Skype works, and how those and other technologies are changing the economics of small business. But a couple of days later, I started having a nagging feeling that something was missing. Several years ago, I heard Scott McNealy, former chairman of Sun Microsystems (now a division of Oracle), say, “People don’t want computers. They just need them to get what they do want.” McNealy wanted to figure out a way to deliver the information and essentially make the computer invisible. (I hope he wasn’t thinking about human-chip implants.)

I don’t want to sound cynical, because the Internet has made it easier than ever before for entrepreneurs like me to start businesses. But it seems to me that the Internet has only provided about half of what the real estate industry needs. It’s revolutionized the ability to find and finance homes. Even at DBNR, we can now post a video about our houses at a single site and have it syndicated - that is, distributed automatically - to dozens of other sites. It’s an amazing time savings.

So what’s missing? Context. Context is one of the things we need most about DBNR property. Certainly, we can find out the basics about a property: who owns it, the property taxes, the water bill. But we can’t find out what the neighbors are like. We can’t find out what the traffic is like. We can’t find out whether businesses are coming into the neighborhood, or fleeing. We need context.

Technology does not yet have a way to deliver what I call human-centered research. If you walked into any neighborhood where DBNR owns a house, you’d be able to discern almost immediately the feeling of the neighborhood, whether there are kids running down the street, or elderly grandmothers rolling their groceries home from a local market. Even then, we would need a method to gauge the source of the contextual information, based on trust, an issue I have strong feelings about and have written about frequently.

Technology is great. But it’s not perfect.

Between wars, oil spills, and economic doldrums, the world seems pretty grim right now. That’s why I was especially interested when Ann Curry interviewed the Dalai Lama on The Today Show last week. This is a man who has had more interaction with the highs (spiritual enlightenment) and the lows (political oppression) of life than most of us ever will. But to my surprise, when Curry asked him about his vision of the next ten years, he was surprisingly optimistic.

He envisioned more peace and harmony for the human race, as well as a lot more people developing relationships in ways we haven’t done for decades - if at all. I also learned that he does not live in a technological vacuum - one of the reasons for his optimism was the reaction of people who rallied to the assistance of earthquake-ravaged Haiti simply by punching a series of numbers on their cell phones. Truly the intersection of the technological with charitable, even spiritual, urges.

To me, his reference was a clear example of people bypassing governments to do some good, to get something accomplished that needed to be done quickly. I sense, like the Dalai Lama does, that we are moving toward a time of greater personal connection. I believe this for two reasons. First, I see technology - whether Facebook or cell-phone contribution systems - bringing us closer together, binding us in ways we’ve never been bound before. But second, I also see us recognizing the need for greater personal connections. Technology is just a way to achieve it more easily.

Now, I’ll be the first to admit that my interest in, and devotion to, personal development makes me think about these issues more frequently than most people. But to me, personal development encapsulates these goals: it’s a commitment to look inside yourself and think more carefully about how you participate in the world outside. That may seem like a contradictory concept, but so too is the idea of using technology (which can be inherently impersonal) to increase personal connection to other people.

So how am I putting this insight into action? Coincidentally, it’s a situation close to home, one related to the story about Haiti I told above. Relatives of mine have experienced a financial, not seismic, earthquake, and they’re in need of help. In the past, they might have gone to a finance company or a sub-prime mortgage company for assistance with their housing situation, but government regulations have managed to create so many “protections” for consumers (and taxpayers) that companies are shying away from situations like theirs. They can’t get help.

This is where the human connection comes in. Though family members might not have done this twenty years ago, when we were all so independent and generations lived apart, I believe it’s time for me to step up and help them, whether to navigate the treacherous waters of the mortgage system, or financially if necessary.

My relationships with my family, my personal connection to them, compel me to help them. The injustice of how they’ve been abandoned by the system - especially a system that thinks it’s helping them - peeves me. It’s up to me to help.