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With the first time home buyer credit expiring in October and nothing in it's place to kick start the market with unemployment at around 10% and many foreclosures still to come i think we still have a way to go. At this point I just don't see the driver for the housing market that would help propel it forward.
I keep seeing people discuss unemployment. Unemployment is a symptom of what has happened, not a predictor of the future. Employment or unemployment doesn't cause or retard economic growth, it's a result of it. The fact is that the overwhelming majority of people are still employed and still paying their mortgages. Foreclosures are due to two things...values dropping and unemployment. As both of those factors abate, so will foreclosures.
Look back at every other recession in the last 40 years: 1974, 1982, 1991, 2001....unemployment followed by growth and full employment. That's the way the cycle works. Unemployment is a lagging indicator that may remain bad, even as the economy is growing. Eventually, the growth generates demand for employment and more jobs are created.
Look, the economy isn't in terrific shape now, and home prices may not be rebounding much any time soon, but there is little doubt of the trend and direction we're headed. I think many people panicked a year ago and they are waiting for "the other shoe to drop" and it's not coming. Home prices will no doubt be pretty flat for a couple of years, but economic expansion may be more robust than the naysayers think and along with that will be a reduction in foreclosures and stabilization.
Historically, after sharp contractions you have sharp expansions. 1982 - 1984 is a great example. We were in a terrible recession with 10%+ unemployment in 1982. In 1984 the economy grew GDP at more than 7%. There is a lot of cash on the sidelines and most people are employed. Once there is more of a "feeling" that things are really heading in the right direction, you'll see the impact. The consumer and businesses turned pretty quickly based on fear a year ago, and the same effect can occur to the positive.
I would not agree that there is "little doubt as to direction...." in housing. All I can tell you is I am very close to banking and there are unfathomable amounts of homes to be released onto the market and there are an equal amount that have been foreclosure delayed. The pipeline is full for as far as the eye can see.
As to comparing "now" to past recessions, we really cant because of the difference in credit expansion and contraction. Our economy has never known credit contraction as we will for the next few years. Banks are flush with funding but they are not lending...they've little incentive to do so...they can borrow from the fed for near 0% and turn around and loan the money back to the government for 4% via treasury instruments. It's a heckuva way to manufacture earnings while taking zero risk.
I keep seeing people discuss unemployment. Unemployment is a symptom of what has happened, not a predictor of the future. Employment or unemployment doesn't cause or retard economic growth, it's a result of it. The fact is that the overwhelming majority of people are still employed and still paying their mortgages. Foreclosures are due to two things...values dropping and unemployment. As both of those factors abate, so will foreclosures.
Look back at every other recession in the last 40 years: 1974, 1982, 1991, 2001....unemployment followed by growth and full employment. That's the way the cycle works. Unemployment is a lagging indicator that may remain bad, even as the economy is growing. Eventually, the growth generates demand for employment and more jobs are created.
This would have been true 25 years ago or 50 years ago.
It simply cannot hold true when an economy is 70% consumer driven as we are today. It's laughable to me to think that "unemployed consumers" are of little consequence or wont retard economic growth in a consumer driven economy.
neil0311, we are in a global recession which is different from other times when there were recessions that we overcame, the unemployment numbers I fear are worse than what is being put out there. The numbers of foreclosed property/shadow property is higher than we know. The number of people about to have their loan reset is also very high numbers. I wish irresponsible lending for homes is/was the problem to all of this but it isn't. I've beat another thread similar to this up already so forgive me for not having the energy to make more sound points & back up what I am writing.
A company I worked for and a very well known one as well closed its doors and many of its competitors also closed shop too (they were in business for over 35 years). Although, they were selling they had a lot of debt but they kept borrowing and people kept lending them money, the amounts of money they were borrowing they could never repay (to me this was so obvious), the CEO's were constantly making bank while the company was struggling and no one wanted to face reality. The company could have been saved had they been realistic about the position of their business and saved for a rainy day. When the people/investors wanted to see return on their investment that could not be produced.
Our nation is in a similar situation in that we are and have been shouldering too much unnecessary debt. I now live in the bay area but have invested in GA as that is my place to go in case something crazy happens here (but actually I also hope to return for many other reasons too).
Unemployment is not something that can be ignored in this recession. This is the best of times for some and worse times for many. People with money are not struggling in this economy one bit. Employed people spend and with all the well known establishments closing in the bay area it is clear to me this is a different kind of recession. People don't even know if they will have their jobs tomorrow. If you have lost a job and are in debt (car note, house note, credit cards) and you loose your job you are in BIG trouble and in no position to go out and eat, pay for health insurance, buy anything (most people don't even have any savings and I feel sorry for the people who continue to invest/gamble their money away to 401k's). Sure the market has its good days, but I can't jump for joy when the companies that are profiting are doing so because they are laying off their workers, reducing salaries and benefits, and or taking their business to other countries where they pay close to nothing for their employees, while my neighbors get foreclosed on. Sure you can report a profit if you do all this. I'm in Finance so when the national debt is so high and growing daily how can you be so excited about this so called gain? We're still in debt with no plan to get out of it. Did the debt narrow or decrease, nope so this recession/depression we are long from it being over. 150K to 180K jobs need to be added each and every month for the job lagging the economy theory to really work. This is NOT happening. The gains I feel are a bit artificial and we aren't feeling it because it doesn't affect us. The banks are still out of control and making profits at this point but they are not learning from previous bad behavior. Don't fool yourself into thinking that we the people are benefiting from these "gains", big business is and we are just another number. Big business is running the show and not our elected officials.
Anyways, GA's infrastructure and the fact that it has a major city that is developing gives me hope that other businesses will want to set up shop in GA. Future declines in the housing market for the state I strongly doubt will continue on the pace as CA and or other places that are on the brink to financial cauos. GA most likely will experience some market growth to GA as you find more and more displaced Californians and like states moving to a more affordable place.
Yet this was the same concern/argument in the last 2 recessions and we came out of it and and the economy grew.
It remains to be seen and while there may be lots of homes waiting to come on the market there are also many people on the sidelines waiting for direction before they buy. We do know that the financial system as we know it will survive (This was in doubt a year ago) and so now the concern is just how deep this downturn will be.
The fact that we are technically out of the recession and the economy will grow the rest of the year is great news.
No one is saying things are great but some of us are a lot more positive then we were in January and can see things turning the corner.
Quote:
Originally Posted by golfwaymore
This would have been true 25 years ago or 50 years ago.
It simply cannot hold true when an economy is 70% consumer driven as we are today. It's laughable to me to think that "unemployed consumers" are of little consequence or wont retard economic growth in a consumer driven economy.
This would have been true 25 years ago or 50 years ago.
It simply cannot hold true when an economy is 70% consumer driven as we are today. It's laughable to me to think that "unemployed consumers" are of little consequence or wont retard economic growth in a consumer driven economy.
The economy has been consumer driven in the US for quite a long time. There is nothing fundamentally different now. 90% of us are still employed and have money to spend. Many are holding back on spending pending the "light at the end of the tunnel" but once they begin, it starts the cycle of recovery. People buy, companies build inventories, manufacturers and suppliers hire people, retailers hire, and the cycle goes.
This fallacy that because we have high unemployment we will never again have economic growth or "OMG...where will the growth come from" is just complete nonsense. The economy turned on a dime last fall and winter when consumers shut down. Those same consumers still have money to spend, and once they don't feel their job is threatened they will ease up on the hoarding of cash.
The real problems in our economy were/are people who spend beyond their means and don't save. Much of this foreclosure problem would have been a non issue had people put more money down in equity when buying a home and not financed with wacky interest only or adjustable rate loans. If you save, then losing your job shouldn't mean you're out in the street in 2 months.
I think whole lot of prices will be falling... home prices, salaries, and probably the whole high living lifestyles that we in this country have been used to since the end of WW2.
We Americans have yet to understand the true fallout from NAFTA, the FTAs, and globalization. This current economic recession is merely a taste of what's to come.
For once, I agree with you.
I don't expect anything to get better. The U.S. is a debtor nation, on its last legs, in my opinion.
The economy has been consumer driven in the US for quite a long time. There is nothing fundamentally different now. 90% of us are still employed and have money to spend. Many are holding back on spending pending the "light at the end of the tunnel" but once they begin, it starts the cycle of recovery. People buy, companies build inventories, manufacturers and suppliers hire people, retailers hire, and the cycle goes.
This fallacy that because we have high unemployment we will never again have economic growth or "OMG...where will the growth come from" is just complete nonsense. The economy turned on a dime last fall and winter when consumers shut down. Those same consumers still have money to spend, and once they don't feel their job is threatened they will ease up on the hoarding of cash.
The real problems in our economy were/are people who spend beyond their means and don't save. Much of this foreclosure problem would have been a non issue had people put more money down in equity when buying a home and not financed with wacky interest only or adjustable rate loans. If you save, then losing your job shouldn't mean you're out in the street in 2 months.
The amount of the economy dependent on consumer spending has only increased over the last several decades, never entering a decreasing trend.
I would disagree that "nothing has fundementally changed"...of course it has, credit is contracting for the first time in 60 years. That is a major fundemental shift. It's not just merely contracting, it's drastically contracting.
Most of the economic expansion of the last several decades is attributed to credit expansion. This propensity for folks to think "it will turn around because it always has before...." is akin to an olympic sprinter dreaming of winning his next race while being rolled out the operating room where he just had a leg amputated.
I agree with you on the folks who "live beyond their means" being the cause of the problem. I just happen to think this probably describes "most" folks rather than just a few folks....which is a bit of a problem.
I think far fewer folks have "cash to spend" than you may believe.
I respect your opinion and think it's a good conversation. We just disagree.
Yet this was the same concern/argument in the last 2 recessions and we came out of it and and the economy grew.
It remains to be seen and while there may be lots of homes waiting to come on the market there are also many people on the sidelines waiting for direction before they buy. We do know that the financial system as we know it will survive (This was in doubt a year ago) and so now the concern is just how deep this downturn will be.
The fact that we are technically out of the recession and the economy will grow the rest of the year is great news.
No one is saying things are great but some of us are a lot more positive then we were in January and can see things turning the corner.
If we can create another bubble then perhaps the economy will "grow" as it did in the previous recessions.
We managed to "grow" out of recession in the early 90's by latching onto the dot.com bubble. The recession after that we managed to latch onto the housing bubble.
The "growth" from both of those cases turned out to be hollow and a fraud. The average stock portfolio today is worth about what it was 10 years ago after the market crash. We'll be lucky if in 2016 the average home is worth the same as it was in 2006 when entering the housing downturn.
Hard to argue either of those are truly sustained "economic growth". It is very hard to find an asset that is worth more than it was 10 years ago, especially if adjusted for inflation and currency considerations.
At this point I just don't see the driver for the housing market that would help propel it forward.
Senators Isaakson and Dodd have proposed a housing incentive for ANY buyer of $10,000. If this bill would pass, I think many people would get off the fence and buy homes. We have been catering to the "first home" buyer, but these are the lower priced homes, in general. We need something to get those middle and upper income buyers to start buying homes.
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Tax Incentive for Housing
