Real Estate Market Commentary - December 2011
Commentary on the Real Estate Market as of December 2011
By Peter L. Zachary, MAI, MRICS
by Peter L. Zachary, MAI, MRICS
I was listening to the news the other morning and heard that the jobs market and real estate market were recovering. On December 22, 2011, the New York Post had an article on page 36 entitled "Room for Hoorahs - Signs Pointing to Possible End of Housing Slump". The article stated:
"After a five-year free fall that wiped out more than half the value of American homes, Wall Street cheered hopeful signs that the nation's housing market may finally be on the mend. New data yesterday showed sales of existing homes rose 4 percent in November alone, reaching a 10-month high. Sales surged 9.8 percent in the Northeast, according to the National Association of Realtors.
The uptick followed surprisingly strong data on Tuesday showing a 9 percent jump in new housing starts in November.
Analysts were also excited yesterday by the rosiest outlook in two years from bellwether home builder KB Home, which reported a 38-percent jump in new orders for November, its best net gain since 2009.
'The housing market has at least bottomed and is bracing for a plus year in 2012,' said senior economist Steve Blitz at ITG Investment Research. He called KB's report 'very impressive and beat Wall Street's expectations across the board.'
Another economist applauded the upbeat sales, noting that a separate outlook for a stronger December, along with cheaper prices, amounted to a 'trifecta win'.
'Sales in November reached the highest mark in 10 months and are 34 percent above the cyclical low point in mid-2010,' said NAR economist Lawrence Yun. 'A genuine sustained sales recovery appears to be developing.'"
I consider the above article to be a public relations pitch by the National Association of Realtors (NAR). You can't blame them for trying to put a positive spin on the housing market, but I don't think we are there yet.
A more realistic article appeared in the New York Times on that same day, December 22, 2011, entitled "Signs Point to Economy's Rise But Experts See a False Down" stated:
"As the fourth quarter draws to a close, a spate of unexpectedly good economic growth since the recovery started in 2009, causing a surge in the stock market and cheering economists, investors and policy makers.
In recent weeks, a broad range of data - like reports on new residential construction and small business confidence - have beaten analysts' expectations. Initial claims for jobless benefits, often an early indicator of where the labor market is headed, have dropped to their lowest level since May 2008. And prominent economics groups say the economy is growing three to four times as quickly as it was early in the year, at an annual pace of about 3.7 percent.
But the good news also comes with a significant caveat. Many forecasters say the recent uptick probably does not represent the long-awaited start to a strong, sustainable recovery. Much of the current strength is caused by temporary factors. And economists expect growth to slow in the first half of 2012 to an annual pace of about 1.5 to 2 percent."
The slow growth in the first-half of 2012 is expected if the Federal government does not pass about $150 billion in relief to the middle class and unemployed.
"'Unfortunately, I think we're going to see a slowdown over the course of next year,' Ethan Harris, co-head of global economics research at Bank of America Merrill Lynch, told reporters last week. 'Not only do we have the European crisis spilling over and hurting U.S. trade and confidence," he said, but the United States economy also faces 'homegrown shocks.'
There are two reasons for the renewed pessimism. First, economists say that temporary trends increased growth in the fourth quarter and may not continue into next year. Second, the economy faces significant headwinds in 2012: some from Europe's long-lingering sovereign debt crisis, and some from domestic cutbacks beyond the control of President Obama, whose campaign would like to point to a brightening economic picture, not a darkening one. Even the Federal Reserve is predicting that the unemployment rate will remain around 8.6 percent by the time voters go to the polls in November.
For now, Democrats and Republicans remain at loggerheads, blaming each other for the uncertainty around the payroll tax rates and aid for the unemployed.
'A two-month extension creates uncertainty and will cause problems for people who are trying to create jobs,' John Boehner, Republican of Ohio and speaker of the House, said on Monday.
'The clock is ticking. Time is running out,' President Obama said at a White House news briefing on Tuesday. 'One of the House Republicans referred to what they're doing as 'high-stakes poker'. He's right about the stakes, but this is not poker. This is not a game.'"
I'm afraid our leaders are just in business to make a paycheck for themselves and are not interested in solving the country's problems. Things appear to be hopeless.
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