Economics Ch 2- Article: Falling Housing Market Tough for Both Sides

With the high possibilities of a recession, the pricing for houses have gradually decreased in recent months; however, people are not quick to jump at buying a house, because predictions say that the house prices will decrease even more in the next few months. This poses as a horrible problem for home owners, such as Mike and Tonya Smith, who want to sell their house. They put their Maple Ridge house up for sale in April below its assessed value, and now, 6 months later, it is still for sale, reduced three times, at $799,900 compared to its current assessed price of $842000. Luckily for them, the house they are planning to buy has also reduced its prices, allowing them to further reduce the price of their own home right now. It is easy to say that the sale of houses in BC today is not in its brightest of times.

Link: http://www.canada.com/vancouversun/news/business/story.html?id=ccea6e0a-1ccd-44c2-93ee-93b50adeb788

The demand for houses is currently at a very low state, while there is a plentiful supply of houses up for sale. There are two very important factors that are influencing this trend, and they both have to do with the future: the future incomes of consumers and the future prices of the houses in BC, especially in the Lower Mainland. With a recession, a worker's future income will most likely be decreased; therefore, they would spend there money more wisely, and on things that are more of a necessity, rather than luxury at the moment. The future prices of houses are also predicted to drop even lower than they are now, prompting buyers to holt their purchases, and wait until the prices are as low as possible. However, if someone is desperate to purchase a home, there are many other cheaper substitutes to buying a house; homes such as condos, apartments, and rooms for rent are much less expensive.

If I were thinking about purchasing a house, I would not want to do it at this point in time, or any time in the near future. Why buy a house now at $800000, when it may drop to $750000 three or four months from now. Whatever the assessment cost of your house is, I believe you should assume it can only be sold for a maximum of $50000 less than that amount, and probably lower as the months go by. Buying a house now will also most definitely leave you with a deficit in the future, if you plan on reselling it in the next year or so. It is a good idea to keep your finances at a good steady pace, as there may still be some surprises in the near future.

Financial Accounting Ch2- Article:Small Business Owners Optimistic in Tense Times, Bank Survey Finds

Everyone, at least the ones with jobs and homes, is aware of the current possibilities of a world recession, and it is rare to find someone who is not pessimistic of the future financially; however, in this article, small business owners in BC have been surveyed, and surprisingly enough, are generally optimistic of the future. This survey enlisted the three main concerns in Canada: maintaining cash flow, managing growth in 2009, and fuel costs, all respectively in order from 1 to 3. Advice from these surveyed owners is also given, and the number one answer for starting your own business is to raise enough capital beforehand.

Link: http://www.canada.com/vancouversun/news/business/story.html?id=6d86864a-1991-4ebe-b2de-0cf76d741760

It is said the number one concern is a decrease in cash flow; this affects the financing, investing, and operating activities of the business. Therefore, the businesses for the future are more likely to repay loans much more slowly, make less profit, buy less inventory, and purchase equipment only when it is totally essential, like when it has been completely amortized, no longer of use, and needs to be replaced, and this is all due to the fact that demand for products will probably decrease. These businesses will not have to worry about dividends or share earnings, as they are small businesses and do not have shareholders.

With all of these concerns in mind, small and big business owners will have to use their cash in a careful manner, as the cash flows of businesses in Canada are most likely to go down. There are two things in this article that come as a surprise to me: the gas prices are the 3rd most concerned about things, and the lack of concerns of the surveyed business owners. One of the few positive things to come out of this recession is a decrease in prices for products, so why would gas prices be a concern? They are now hovering around $1.2/L, which is much better compared to when the prices peaked at $1.5/L a year ago. This possibility of a recession will decrease the pricing on almost everything, which is a major problem for business owners selling inventory and services; therefore, I feel the business owners should ask a qualified professional in the finance industry on what the best thing to do is right at this moment in time.