Gentle Ben Says the “R” Word…Finally!

Gentle Ben Bernanke has been careful not to ruffle any feathers on Capitol Hill since assuming his role as the chief caretaker of the U.S. economy.

But during his first day of testimony before Sen. Charles Schumer’s Joint Economic Committee this week, Bernanke reportedly admitted that the nation may actually be headed toward a recession. Oh no! He finally used the “R” word. What a surprise.

Many economists who were once naysayers — like Bernanke — are finally owning up to the fact that they may have been wrong, and that a recession is already here. Gentle Ben has been taking his sweet time about it, but it seems like he’s thinking about joining the chorus.

Our present situation is starting to look more and more like the recession of the early 1990s, but for the high interest rates. The foreclosure spigot is wide open as it was back then, with no end in sight of the flow drying up anytime soon.

Job losses, which were a big part of the problem back then as well, are starting to gain momentum.

Friday, the U.S. Labor Department announced the loss of 80,000 jobs in March 2008, taking the nation’s unemployment rate from 4.8 percent up to 5.1 percent. That makes for three straight monthly losses and a total loss of 232,000 jobs for the first quarter of the year. These statistics come at the end of a week that saw two airlines — Aloha Airlines and ATA Airlines — turn off the lights, close their doors and layoff employees while filing for bankruptcy protection.

Plus, let’s not forget that the U.S. dollar is a joke compared to international currencies these days and inflation is raising its ugly head again (lest we forget about rising food prices and energy costs).

All that seems right with the world this time around is that we don’t have double-digit interest rates like back in the 1990s. Gentle Ben was hoping that lowering interest rates would make for a soft and “gentle” landing — which it hasn’t.

Frankly, it you add all this together, you can see why investors from around the world (I’ve heard especially that Canadian investors are showing increased interest in U.S. real estate holdings) are looking to our shores for great deals. Their dollars go a lot further these days in purchasing U.S. commodities — like our real estate.

Still, for investors and potential homebuyers watching this happen from the grandstands, all these factors seem to be saying that the stream of foreclosures is not going to stop flowing anytime soon. At least not in 2008.

Although home sales are starting to see some recovery, most experts are predicting that home prices have a while to go before they hit rock bottom. But since you can’t really time the bottom, now may be a good time to take the plunge and start looking for those good bargains that foreclosure properties can offer.

After all, by the time you do your research, find the property that’s right for you, and actually close escrow, who knows? The market may have hit bottom, be set for recovery and your investment may start paying off sooner than you think. Buy and hold. That’s the strategy that will work best for most investors and homebuyers while Gentle Ben and his comrades work out the economic details.