I'm writing this as much for myself as I am anyone else... I am an Economics junkie - always have been.
With the lower than expected jobs numbers released last Friday, there are really smart folks who think the numbers might actually be off because of some complicated seasonal adjustments /equations. They could be right, but the seasonal adjustments are not so far off as for the jobs numbers to be completely ignored.
To me, the more interesting numbers, are the Daily Growth Index (started in 2004) and the Bureau of Economic Analysis (used by the White House). Unlike jobs numbers that are only looking at Jobs, this index looks at "REAL" Leading Economic Indicators. These reports indicate the beginning of a "W" to me (as opposed to a "V")...
One of the biggest factors I don't hear Economist discussing is that we "ducked" a full depression because of all of the Government Stimulus last year. That Stimulus added at least 2 percent to GDP. If that stimulus goes away (as it is suppose to do by the 3rd Quarter of this year) then where does that leave us...
One economist I read recently quoted Bob Dylan, "There's A Slow Train Comin'..." I agree, and I don't think we will be positive GDP at the end of 2010 - at best, I feel we will be "neutral."
Bottom line, we have three choices when it comes to our Economic Future. We can reduce our Private Debt, reduce our Public Debt, or run a Trade Deficit. We can not do all three at the same time, and we must choose a path.
No matter WHICH path we choose to tackle first - we will not be able to ANYTHING positive without tackling our Energy Policy. I think the next huge debate on Capitol Hill could be how high the Gas Tax is going to be - some think .09 cents per gallon should go to 9 DOLLARS... all those Ga-Gillion Gallons of Oil we watch daily pumping into the Ocean are going to force this discussion, and that "tight rope" our Economy has been on just got SLIPPIER!
See these "W's" in the Four Bad Bears?? I think it's possible that before we head completely out of this "Bear", we will hit one more "W". Maybe not a big one - but I think there's no doubt that's what's coming.
SO - what does that mean for the housing market, and what we should be telling customers? I think we should be saying the exact same thing the "talking heads" on CNBC are telling Investors. At this point, I think we all know the difference between a House (as an Investment) and a Home... For most Americans I know, if you are IN a Home - and you can afford to stay there, do so.
Be "in the housing market" for the long term. If you are in for the long term, the daily, monthly value movements won't matter because after this next bump - we'll be heading in the right direction.
If you are trying to "short the market" be careful! There's a TON of money to be made in Real Estate right now. Anytime there's this much confusion, pain, and volatility there's going to be people making MONEY. But shorting the market should be done by professionals!
More than ever, people need a professional Realtor to help them with their Real Estate Investment. Period. We have more Volitility ahead - and consumers NEED Professional, Informed Realtors, because there are huge questions from the information above.
If we ARE going to tackle our Energy Policy - what does that mean for Real Estate in more Rural Areas? Is there going to be a higher demand for property in high density, or "rail ready" areas? I think Agents should be considering how these Economic factors are going to affect the Real Estate Trends in your local market.
As I said, I am fully considering these factors for our business as well. We get more than 60% of our business from USDA Home Loans. Purely based upon the market, and the Economic Trends - and knowing that there are people making MONEY in this market, it's important to be WHERE the money is being made... and to anticipate a potential shift.
Eleanor, thanks for the economics article. Gives us a lot to consider for future.
Eleanor:
Nice work and excellent thoughts. Its not going to be a V recovery so I would concur with a W shaped recovery. The stimulus over the last several years has helped to reinflate our growth but as the stimulus is being withdrawn the artifically inflated growth will stall.
Without jobs growth we can have no sustainable recovery. My experience in the market with small business is that loans are not being made and the small business arena is still struggleing to survive let along experience any re-emergence of growth. Given the current foreign markets and their difficulties, I beleive we are far from out of the woods. The current growth experience is going to falter and we will see another bottoming long before we see any sustained growth.
Royce Vanderpool, REOS, Principle Broker - Devan Realty & Development Corp.
Eleanor, as a mutual economics Junkie (I got my degree in Econ!) I agree, RE is a long term investment, not a short term one. If you plan to buy a HOME and Plan to hold onto it for the long term than BUY BUY BUY! My gut tells me we will see prices in RE to be pretty stagnant for a year, and then slowly grow with inflation after that.
I agree - Our market is driven by the fact that we have J-O-B-S in the Research Triangle Area, so we should see pretty stagnant values... with the exception of Foreclosures. Those REO properties are still getting well above 85% of asking price from what I recently saw.
Eleanor: Excellent article - yes, I think we are in for another dip and then who knows? Sometimes I think we are making this up as we go along......and we are all on a different page! Oh well, we will see what transpires and work with what we have.
Eleanor: Very well researched post containing many interesting points. It certainly doesn't seem as if we are on a roaring recovery just yet.
Terry and Bonnie - yep, we are going to just work with it.
Matt- we each need to remember to look up and take notice of how this is changing our individual markets. Sometimes we get caught up in looking at just looking at whats working now, and not at how all of this might change buying patterns.
You may like my forecast I posted yesterday, Right up your ECON Junkie alley!
We can't keep this up, we have already indebted our next generation. How far can we go?
I am not an economy junkie but here is an intersting thought. My husband works for his new company. They build product A in various sizes for various markets. They are bursting at the seems with orders. Orders need parts. Parts not available because suppliers scared to hire and therefore cannot increase production. Parts not being recieved, orders will be lost. This is just a little crazy, this is big money and company is the leading supplier. No-one else will be able to provide these machines either because parts not available.
It's like a merri go round. And we are not talking small items and orders here, this is business in the millions. Sad. The parts suppliers will not risk hiring even with orders on the table.
I agree, all indicators indicate we are still on very shakey ground, and the likelihood of another few huge "W's" is huge.
Home vs Investment --- I don't think we've even tapped the strategic foreclosure market - not in my area.
We also have Loan Mods that are TEMPORARY fixes - 3-5 years. When you have a property that is 50% underwater, in 3 - 5 years do we really think it will be back to the value it was.... doubtful
Lots to think about.
Great article, gives me a lot to think about. Great Post!
Tell them "Now's the time to buy!" Buy low, get more house for your dollar.
Now is definitely the time to buy. Hopefully the lower than expected jobs number is because of seasonal adjustments and we are climbing out of this funk.
Eleanor, I love it. Thanks for sharing the chart and stats. We've been hearing and "feeling" the same thing about the "W" line. No "V" expected on this rebound. We're telling customers to adapt and sort of get used to this kind of real estate market. It's going to be like this for a while, probably 1-3 years. In our area of Jacksonville FL, foreclosures are often going above market value with competing offers. But typical resale home values are definitely struggling...and that is to be expected.
Great post, Eleanor. Interesting to see Bernanke's remarks that he doesn't think there will be a double-dip (link here). With everything going on (Europe and Euro struggling mightily) and China forcing itself to slow down; then how is it possible for the US to garner enough growth to pull ourselves out of the current recession. Great points with the Daily Growth Index.
Eleanor,
Great Blog, well the numbers are the numbers.... problem with some of the information is in how the numbers are compiled as well you are aware. And I like you wonder why most (if not all economist) fail to mention our "ducking" a full depression due to government stimulus intervention.
Our economic recovery is taking shape, I prefer it be a slow, steady sustainable economic recovery.
Thanks AR Gods for the Feature!
Edward - I totally agree! "The numbers are the numbers... problem with some of the information is in how the numbers are compiled." That's another reason why it is so important for consumers to work with a PROFESSIONAL. I just don't think it makes sense to "go it alone" when you are in the Real Estate Market.
I heard someone say, "Mr. Seller, if you had a $300,000 IRS lien - would you pay for a CPA? (the answer was yes!) If you had a $300,000 lawsuit - would you pay for an attorney to represent you? (YES, the Seller nodded). Well, you have a $300,000 real estate problem, and you need to understand that you NEED representation."
Thanks for posting a great article Eleanor. Let's hope that slow train keeps onchugging along down the line.
Pretty pleasant news considering. Agree with Ocean . . . hope that slow train keeps chugging down the line!
I am an economics fan too, I really enjoyed reading your post. Also you, as an economics junkie would really enjoy reading the blogs on the Ludwig von Mises Institute site http://mises.org/ and check out Meltdown by Thomas Woods, it is an incredible book that goes into all of the factors that led up to the housing market difficulties over the last few years.
Eleanor - I wish I was as smart as you. THat's why I read your blog - even when it's not as positive as I wish it could be!
Eleanor thank you for posting this information. I'm an economics illiterate and rely a lot on supply and demand trends, so it's good to read your economics info.
Great information Eleanor, that slow train isn't the new one that Amtrak just added to the Raleigh-Charlotte run is it.