ECONOMIC OUTLOOK Over twenty years of proven expertise and trend analysis in evaluating residential property values. |
 |
To help our customers better understand current market conditions and projections, Local Market Monitor provides periodic analyses of national economic trends and their impact on real estate markets. This analysis, developed by Ingo Winzer, reflects his view on the current outlook for the national economy. National Economic OutlookJanuary 28, 2009 With the economic statistics getting gloomier by the week, it's important to know if we should look for a long period of the same, or if we are just in the worst part of a correction that will "only" last another year or so. For much of the economy, I think it's the latter, but not for autos or housing. The statistics are grim: jobs down 2 percent in the past 12 months and certainly headed lower, industrial production down 8 percent, home prices down 8 percent and much more in some places. Mortgage delinquencies twice as high as a year ago. So far, though, the rest of the economy has been relatively insulated from the catastrophe in the home and auto sectors. These sectors expanded artificially through easy loans and will take a long time to recovery. But the rest of the economy is in much better shape. The job situation tells part of the story. Of the 2 percent total drop in jobs, half came directly from the housing and auto sectors. Another quarter came from companies shedding contract workers, as intended during a slowdown. And the large health care and government sectors that account for a third of US jobs actually grew by 2 percent. The US-owned auto companies won't recover from the current abysmal situation intact, partly because they sold their cars at prices so much above the resale value that their loyal buyers will be stuck with them for years. It will take housing even longer to recover. Too many homes were built, many sold as "investments". About 10 million homes sit empty, of which 5 million can be considered excess, and the growth of the population only absorbs 1 million homes per year. We believe home prices will fall more than 7 percent in 2009, with declines above 20 percent in many markets, including some very large ones. And even though the second year of declines [2009] is often the worst, many markets will see prices falling for another 5 years. ARCHIVED OUTLOOKS
|
|