It is a bad thing. So is a lack of confidence. One reason why the market tanked before was the lack of knowledge. And that is what we have here. We know prices on real estate continue to decline. Fear is in the street...maybe not blood, which is why more are not taking that time-old Rothschild advice to buy when there's blood in the streets, even if the blood is your own. The uncertainty extends to lending, because the market is nowhere near where it needs to be for CRE. People are scared on so many levels. Even the time honored tradition of eating out is taking a major beating.
I don't know how to create certainty or confidence. Yes, there are some encouraging signs recently; banks making profits, consumer news, and so on. But when faced with uncertainty the gut reaction is to sit tight. And that may not be bad. Just remember that downturns are often when the most money can be made. Ask a Rothschild if you don't believe me. The only certainty is that the cycle will again turn, be it next week, next month, next year or in ten years. Just as a boom cannot last forever, neither can a bust.
By the way, I think the best news I saw on the economy over the weekend is that people in LA are starting to get plastic surgery again!