What are the Solutions for the Real Estate Problems in the Lowcountry of South Carolina?

I framed the title of this post as a question because I'm not certain I have the answer. I have ideas however, and would invite others from around the world to comment. I'm certain that many of the factors impacting our market, Hilton Head Island and Bluffton, South Carolina, are similar to those affecting other markets, and yet we all likely have our own unique problems.

Let me start by talking a bit about why our southern resort location was touted as one of the best real estate markets in the country several years ago. At least that's what we, here, were saying. The economy was moving along smartly; baby boomers looking for second homes and eventually to retire were to be leaving on the next train from the north for our beautiful year-round climate; cash flow was still available for investors; and even at the peak, many of us said (me included) that compared to other resort communities, Miami, for example, our resdiential real estate was still undervalued. And Bluffton prices were, on average, 20% lower than prices on Hilton Head Island.

And then everything went the wrong way. It's complicated, but let's face it, we learned once again, that home prices can't go up for ever and yet, the whole economy was tied to that fantasy. Arguments will go on for years about Wall Street greed and corrupt CEO's, etc. but to blame our current global economic problems on these factors alone is a bit like blaming an air plane crash on gravity. The real genesis of our global problems was that people chose and, yes, in some cases were improperly drawn, into buying homes they could only afford if prices kept going up and they could continue to pay with equity drawn from those very homes. Couple that with the ability to lend with no money down and a statement that "I have a business but little income" and that mysterious pool of global investment money, always looking for places to put it for the right return, saw American housing as one of the last best remaining spots to invest. This global pool of money logically welcomed the system here that would lend easily,draw equity from homes after intial loans, package them up in neat investment securities and sell them. We were off to the races.

This all started with a noble idea - everyone in our country should have the opportunity to own a home. Gravity, and a regulatory system that couldn't or wouldn't keep up, took it from there.

So where are we:

1. Prices in our area have declined by as much as 40%, in some locations more. If we argued that there was good value three years ago, nobody can say there isn't good value now. The fact that no one can say for certain how low prices will go certainly keeps some buyers on the sidelines, but for first time home buyers, or investors in for even a "short" long haul, a buy today will be a good investment at some point in the future.

2. Folks up north can't sell their homes in order to be able to move to the land of milk and honey in the Lowcountry. The trains south have been derailed for the time being. But this has been a big factor from the beginning of the downturn here. The baby boomers are holding their ground.

3. Loose, reckless lending practices have swung way too far in the opposite direction and I have heard that many potential buyers, even with excellent credit, can't get loans without in some cases 40% down payments.

4. But the most significant problem, from my vantage point, is just plain fear. How can I buy a home, even at fire sale prices, when I'm just not sure I'll have a job tommorw. I think this is the biggest factor and yet the most difficult to tackle in the short term.

It would seem logical to tackle the jobs problem first and there is no doubt it needs to be addressed, but the best way out in my view is to go back to the root cause and step by step solve the problem that started this mess, clear up the foreclosures and get banks lending on reasonable terms. From there confidence will return and gravity will lose some of its pull.

These are thoughts from one not too well versed in the details of finance and credit default swaps and other devices that simply created more opportunities to "buy into" a fantasy; so I welcome comments from others who undoubtedly understand this better than me, here in the Lowcountry and elsewhere.