This week’s commentary has presented much news of the past month’s perspective with regards to the economy, including important indicators towards real estate. It is a good time to have an understanding of where we are now and where we are heading; why? knowledge is power and we absolutely should know the facts and not hearsay about important matters. Educated decisions are those which are most likely to produce better results.
First, we are on a path back to growth from the recession which began in 2007. We knew that since that time, the path would be sporadic and one of extremes. Last weeks data on economic growth show that large parts of the private sector continue to strengthen, and that business investment and consumption are getting stronger. We know that uncertainty is still part of our collective psyche with regards to the economy and its recovery, but to quote Henry Ford: “Coming together is a beginning, keeping it together is progress, working together is success”…we should never lose faith in the American worker & ingenuity, as well, as Helen Keller professed: “Never bend your head…hold it high. Look the world straight in the eye.” We do gain strength from one another in so many ways, and we will collectively be our own best support system in the long run.
Economists Ken Rogoff & Carmen Reinhart have written that in reality, recoveries from financial crisis are typically hard to climb. Repairing a severe crisis means growth comes more slowly. Here is the good news, despite the challenges we face, according to Timothy Geithner: “exports are booming, private job growth has returned (though at a snails pace), businesses have repaired their balance sheets and are now in a strong financial position to reinvest and grow, American families are making every attempt to save more, pay down debt and borrow more responsibly, and banks are in a better position to finance growth with care.” We can also proudly say that The Big Three in the American auto industry have become one mean, lean machine competing heartily in the U.S. with foreign positioned companies.
As much as these are positive indicators, still many American citizens are struggling to make ends meet and looking for work. The construction industry has been hit hard and the supply of homes on the market remains high. These times require concentration on the present moment along with a sincere belief in positive outcomes…maintaining this outlook helps greatly when new challenges present themselves.
Let’s talk about some truly great news on the real estate front starting with mortgage rates: they are at historic lows. Don’t pass these by if you are ready to invest. According to Angel Sherlin of Bank of America, there has never been a better time to purchase or refinance. Here are current rates:
30-year conventional fixed – 4.35%. 20-year conventional fixed – 4.25%. 15-year conventional fixed – 3.75%. FHA-4.25%. VA-4.375%. Rates are subject to change but what a great incentive to move now on today’s real estate opportunities. Investors expect that slower than average economic growth for several years is likely to keep mortgage rates down. Ben Bernanke has said over the past week that “the economy is now expanding at a moderate pace and consumer spending seems likely to pick up in the next three quarters at the same time recognizing notable restraints on the recovery, including housing, commercial real estate & the labor market. Alan Greenspan has just implied that “the slowing recovery felt like a quasi-recovery and the economy could contract if home prices decline further.” This leads me to talk about the housing market. Single family housing has maintained a steady pace over the past few months despite the First Time Homebuyer Tax Credit deadline of April 30. According to the Chattanooga Association of Realtors, “over the next several months, we expect to see some improvement in both housing starts & sales as activity as buyers come forward to take advantage of the very attractive home prices, historically low mortgage rates & excellent selection that characterize today’s new home marketplace.” As well, nationwide permit issuance, an indicator of future building activity, rose 2.1%. The National Association of Realtors reports that existing home sales remain relatively high despite the “understandable swings as buyers responded to the tax credits.”
Lawrence Yun, NAR Chief Economist, says “only when jobs are created at a sufficient pace will home sales return to sustainable healthy levels. Distressed homes accounted for 32% of home sales in June. NAR President Vicki Cox Golder, says “despite recent market swings, total annual home sales are rising above 2009 and we’re looking for overall gains again this year as well as in 2011. Conditions have become more balanced in much of the country, which is good for both buyers and sellers.” Yun continues: “the supply of homes on the market is higher than we’d like to see but home prices are still holding their ground because prices have already over-corrected in many local markets.”
We must recognize that during the housing boom, homeownership was at an all time high, however many are on the verge of foreclosure which threatens to send this level to its lowest in 50 years. In fact, fresh projections according to USA Today, indicate that “rates could plummet to about 62% as early as 2012 and almost certainly by the end of the decade. Homeownership rates have not been that low since 1960.” Geithner admits that we have a “long way to go to address the fiscal trauma & damage across the country and will need to monitor the ups & downs in the economy month by month. We need to ensure that the unemployed have the skills needed to re-enter the 21st century economy. Congress should move now to help small business, to assist states in keeping teachers in the classroom & improve education, to reduce health care costs, increase investments in public infrastructure, promote clean energy & increase exports. We must also cut the deficit over the next few years and make sure that America once again lives with in its means.
President Obama has recognized that “we suffered a terrible blow, but we are coming back.” I might add an ancient but timely quote: “Do not dwell on the past, do not dream of the future…concentrate the mind on the present moment.”
(Melinda C. Whiteman is a realtor with Keller Williams Realty and can be reached at 664-1600 (423) or 820-7873 (706).