Real Estate

Starting right now, there should be an uptick in hiring due to the stimulus spending and getting ready for the Christmas season. We are also seeing some increase related to the increase in auto sales.

Will this uptick be enough to reduce the unemployment rate? We saw a very minor tick down in the July unemployment rate that may disappear upon revision. There are still jobs being lost, as there always are, and new people enter the workforce. To offset this we see a certain number of people leave the workforce due to retirement or death and we also have a certain number who partially retire, going to part time work.

We have a very large number of baby boomers who are entering the retirement age demographic. Due to recent economic events, some of them have been forced into early retirement, but more have revised plans due to loss of retirement assets and/or home value.

A lot of the increase in savings we have seen is being done by these very people as they try to recoup or replace these lost retirement savings. Will this new thrift continue? Generally speaking, the baby boomer generation has not shown tremendous ability to postpone gratification. In addition, some of this reaction was inspired by a degree of panic that has started to dissipate.

The increase in stock prices is part of the recovery equation that helps these baby boomers recoup some of their wealth. What is needed next is for their to be an upturn in real estate prices. Now most experts are predicting that prices will continue to fall for another year. Most owners, feel that prices have hit bottom and will start to increase. Why would we have this disconnect? Well their are two clear factors. In some parts of the country real estate is truly depressed. Many people have been foreclosed on and almost all sales are those of foreclosed homes. However in other parts of the country things have just not been that bad. This is related to the number of houses in play so to speak. Where there has been significant new construction and therefore new buyers at the top of the bubble, California, Nevada, Florida, Arizona, the downturn has been catastrophic.

However in more stable parts of the country, while much of the sales activity has been in foreclosed homes, most people simply postponed any plan to sell their home, waiting for prices to increase. So, for the relatively small number of homes in those areas that were in foreclosure, prices were very reduced, the number of homes actually impacted and overall sales activity was very slow. Further the reduction in price from the bubble period is not very dramatic.

One area that saw tremendous price escalation was Washington D.C. From May 2006 to now the median asking price of a home there has dropped from 489,000 to 307,000 a 37% drop. However the rate of decline has decreased tremendously recently although it is still happening. Now inventory of home for sale in the D.C area is around 30,000 (it was up to almost 40,000 at the peak). If you look at Dallas TX during the same period you see that median asking prices actually increased from 165,000 to 201,000 during the same period with inventories dropping from a little over 35,000 to a little over 30,000.

Dallas is certainly an exception, but as I look at area after area, it is clear that while most have seen some decline in prices due to worsening economic conditions, most have not seen the dramatic impacts of the states hardest hit. So while the amount of activity has been greatly skewed by the number of foreclosures in the hardest hit bubble states, most Americans don't actually live in those states.

So where national statistics are grim, many local statistics are nowhere near as bad. In fact, I see many real tors in this area trying to get me to sell be saying they have plenty of eligible buyers. I don't intend to sell, but advertisements like that, even if exaggerated would lead me to believe that if I did, I could get a decent price.

Looking at real estate from a National perspective ignores the three fundamentals of real estate, location, location, location.