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Good Economic News, but No Easy Breathing Yet - 2009-05-24 |
There was a flurry of unexpectedly good economic news recently, and it gave rise to a little optimism in the real estate sector, something we haven't seen in quite some time. Maybe this is the start of something big.
For starters, Federal Reserve Chairman Ben Bernanke said there are signs of a bottom in the housing market and that consumer spending had stabilized. These pieces of the economic puzzle are important because spending represents some 70 percent of our economy, and because confidence pays such a large part in the home buying decision.
And remember, these words of encouragement are from a man of few words, and his words are often intentionally vague.
Atlanta Federal Reserve president Dennis Lockhart was slightly more reserved, but unmistakably positive last week when he told a group on Jekyll Island that "conditions are now calmer, but it is too soon to breathe easy."
OK, no easy breathing yet! But just look at all the good news:
New job losses were lower than expected, and well under the benchmark of 600,000 that some economists think signals a declining versus recovering economy. And consumer spending for the first quarter showed unexpected strength after a dismal fourth quarter last year.
And even though the stock market is largely unrelated to housing, the recent surge of 35 percent in the S&P 500 Index has boosted consumer confidence at all levels, reflecting Americans belief that the economy is moving toward recovery mode.
On top of all this good news, I received the results of the RBC CASH Index. CASH is an acronym for Consumer Attitudes & Spending by Household. Here are their findings in a nutshell:
* The RBC Jobs Index saw a rise of 9.2 points in May to 54.4, compared with 45.2 last month. Ratings of 50 or better imply optimism. This is the second consecutive increase in the jobs index following six straight months of decline.
Interestingly, it seems that jobs confidence is improving even as overall unemployment is growing across the nation. Expectation for future employment showed the strongest improvement.
* The RBC Expectations Index showed that 36 percent of consumers believe the economy will be stronger next month, while only 20 percent expect it will continue to weaken.
* their Investment Index rose to 49.6, reflecting an improvement in respondents personal financial conditions and growing comfort with investments and major spending, such as buying a house.
And it’s more than just me seeing the writing on the wall. There is a growing belief among financial experts that the recession is over.
Barry Knapp, a strategist at Barclays Capital, wrote recently that the economy appears "to be in the sweet spot of a recovery" and that the recession may have ended last month, according to Bloomberg News.
Liz Ann Sonders, chief investment strategist at Charles Schwab, said on "Good Morning America" recently that she agrees with that conclusion.
"It isn't any brilliant prescience on mine or anybody else's part," Sonders said. "There's certain indicators we can look at to set the turn, and I think we have seen that turn."
Sonders warned that unemployment is a lagging indicator and, historically, employment figures don't begin to recover until six months after the end of a recession. That means that this time around, unemployment likely won't peak until the end of this year.
But, she added, there are already positive signs on the employment front. Layoffs are slowing, and unemployment claims are starting to edge lower.
Meanwhile, there is more good news in housing:
"We're hitting some trends that show that we may be approaching a bottom, or we may be at a bottom right now," said Pat Lashinksy, the CEO of online broker ZipRealty.
A leading indicator for the housing market is inventory, the number of homes on the market. When the number of homes for sale goes down, prices rise and the market improves.
Lashinksy said that's what's happening now. New data from ZipRealty shows that buyers are moving into the housing market at levels not seen in two years.
"Inventory levels are actually declining, and median home prices of homes available for sale have actually gone up," Lashinksy said.
ZipRealty said that as of right now, it would take 8½ months to sell all the homes currently on the market, down from a high of 11 months in October 2007. Most market watchers feel that an inventory of about six months creates an equilibrium between buyers and sellers.
"The fact that inventory is declining is suggesting that soon we may see home prices begin to stabilize. In some markets, it may begin to turn upward. But the downturn in the housing that we've had for the last three years may be coming to an end," said Lawrence Yun, the chief economist for the National Association of Realtors.
"Buyers are a lot more engaged," Yun said. "There's an excitement and a passion that hasn't been seen in the last 18 months right now."
What's motivating buyers is low interest rates on mortgages, lower home prices and a new $8,000 tax credit for first-time buyers. In addition, some first time buyers in Georgia will qualify for up to $14,000 in additional grants under the Georgia Dream Loan program.
So, is this recession over? It’s too soon to tell, but the signs are beginning to look encouraging. We will watch and report in future issues.
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Upcoming Events
"EPA CERTIFIED RENOVATOR" TRAINING
Do You Work with Real Estate? You Must Be LEAD SAFE CERTIFIED as of April 22nd.
To all owners, realtors, investors, property managers, contractors, electricians, plumbers and painters. Do you ever engage in any level of renovation? If so, read this:
Any renovator, from owners to contractors, from plumbers to electricians to painters, who disturbs lead paint while working in a pre-1978 home, school or day care center, now must be Lead-Safe Certified. If you’re not, you can face tens of thousands of dollars in fines. Plus, you put the health of yourself, your workers and your customers at risk, which could result in lawsuits. One simple 8 hour class certifies you for five years. It’s that easy.
Since April 22, 2010, there are new Federal rules regarding how you perform any work that disturbs lead-based paint in homes, child-care facilities and schools built before 1978. You now must be EPA certified and follow specific work practices to prevent lead contamination.
Failure to follow the new rules can result in federal fines of up to $32,500 per day or up to 5 years in federal prison, or both. Don’t take a chance - it’s not worth it.
How To Become an EPA Certified Renovator:
In just one day, John Adams will teach you how to meet all EPA requirements and become an “EPA Certified Renovator.”
Don’t wait - register now! Click on “Seminars” and choose your day!
- Friday, July 30th at Suburban Plaza, 2643 North Decatur Road and Church Street, Decatur , Lower Level, beneath Hancock Fabrics
8:30 A.M. to 5:30 P.M.
- Friday, August 06th at Suburban Plaza, 2643 North Decatur Road and Church Street, Decatur , Lower Level, beneath Hancock Fabrics
8:30 A.M. to 5:30 P.M.
- Friday, August 13th at Suburban Plaza, 2643 North Decatur Road and Church Street, Decatur , Lower Level, beneath Hancock Fabrics
8:30 A.M. to 5:30 P.M.
- Friday, August 20th at Suburban Plaza, 2643 North Decatur Road
and Church Street, Decatur , Lower Level, beneath Hancock Fabrics
8:30 A.M. to 5:30 P.M.
- Friday, August 27th at Suburban Plaza, 2643 North Decatur Road
and Church Street, Decatur , Lower Level, beneath Hancock Fabrics
8:30 A.M. to 5:30 P.M.
Total Course Cost: $295, includes exam and EPA-HUD 400 page manual
Space is limited to 20 participants.
Training services provided by Seagull Environmental Management Co, Inc.
Courses are approved for purposed of certification under Section 402 of TSCA for the Certified Renovator.
This course has been approved by the Georgia Real Estate Commission for 7 hours of Real Estate Continuing Education
For more information, call toll-free 888-373-0029
Click above on the "Seminars" button to register
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John Adams Presents
“The MetroVestAtlanta.com REO Bus Tour”
Get on the bus for a tour of South DeKalb County’s “Real Estate Owned”
homes. Each house you visit will be available that day for purchase at
a giveaway price, regardless of current condition. Financing is
available!
Throughout the day, we will hear from mortgage providers, people in the
construction business and property managers all discussing today’s
situation with Bank Owned REO properties.
Who Should Attend: Investors, Realtors, Lenders, Prospective Buyers, and
anyone who might want to buy a super-bargain house and either do the
rehab themselves or have all the work performed by the pros.
You will see abandoned dumps and finished products, and everything
in between. And Snap will be there to answer all your questions and
explain the rehab and rental strategies.
Saturday, August 21st, 9:30 AM to 4:00 PM
Your $49 fee includes the bus tour and lunch. You must make reservations. No walk-ups.
There is limited seating and the seats are filling fast. ACT NOW before you miss the bus.
We will be meeting at Suburban Plaza, 2643 N. Decatur Road and Church Street, Lower Level, Decatur 30033 (beneath Hancock Fabrics, in the arcade.)
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