ECONOMIC OUTLOOK Over twenty years of proven expertise and trend analysis in evaluating residential property values. |
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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 OutlookDecember 4, 2009 Although the financial sector received the lion's share of attention during this recession, for creating and consuming toxic investments on a grand scale, it's the situation of consumers that determines when the recession ends and whether home prices pick up. Consumers spent money they didn't really have, then were forced to stop. But they'll spend again as soon as banks give them the credit to do so.
Some signs are positive for consumers. Delinquency rates on credit cards, which increased rapidly during 2008, have now been flat for three quarters at 6.5 percent as banks vigorously pruned hopeless borrowers. With commercial real estate loans souring rapidly, banks will expand credit card lending as their best bet for profits.
In addition, the employment situation apparently has stabilized at 132 million jobs [down 7 million since 2007]. If you haven't already lost your job, you probably won't. New hiring is still a way off and the unemployment rate may still increase, but most of the damage is done. This is a turning point that also will encourage renewed - if cautious - spending.
While these are good signs for the economy as a whole, a recovery in the housing markets and particularly a pick-up in home prices is still some way off. Though the number of home sales will increase, home prices in many markets will continue to fall. Overall, prices in the third quarter of 2009 were down 5 percent from a year ago - down 20 percent in Miami, Las Vegas and Phoenix. Prices were down by double digits in 50 of the 315 markets we cover.
On the positive side, home prices were up in a larger number of markets, many of them in Texas.
We expect a further 5 percent decrease in home prices during the next 12 months, with double-digit decreases - though mainly in the 10 to 12 percent range - in some 30 markets in Florida, California, and the Southwest.
As consumers resume spending - on a more modest scale than during the boom - economic growth will pick up, but housing markets will take much longer to recover. ARCHIVED OUTLOOKS
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