The Real Story…
News and commentary about the real estate market and related topics.
Dave Parrish, ABR®, CSP, GRI, ePRO®,REALTOR ®, RE/MAX MarketPlace
The opinions expressed here are my own and don’t necessarily represent those of RE/MAX International.
No man is an island…
We like to think of ourselves, as free and independent… it’s built into the genes of every American citizen and those too who wish to be citizens of this land. As a matter of fact, a large part of the holiday just celebrated honors not only the historic event occurring more than 200 years ago but also a national belief that we operate independently of all others. It is very much similar to thinking of ourselves, as an island unaffected by the events of foreign shores or different planes…
In the realm of real estate we have quickly and painfully learned how inaccurate this idea is… for we are now paying for the irresponsible and greedy actions of many. They may have been mistakes made by others and it may even be that we too contributed to those pains now shared.
As much as we want the turmoil of this recession and the dower real estate market to be over, it is not nor will it be anytime soon. As a matter of fact there are reports from dependable sources that not only is it continuing but that it may even dip further.
In a recent interview economist, author and Yale University Professor Robert Shiller (co-founder of the Case-Shiller Home-Price Index) says that chances are ‘substantial’ that the United States is headed back into a recession.
A weak U.S. housing market and a murky global economy indicate that the country is at a “tipping point” at the edge of a fresh economic contraction. While some economic models suggest the economy is on the path to recovery, we are in unchartered territory, which due to the numerous unknowns makes these models less reliable. Shiller believes the U.S. economy will face a double-dip… further economic stress largely based on the current fragility of the housing market.
Home prices dropped 33 percent in 20 cities through March from their 2006 peak, reaching their lowest level since 2003, according to the latest Case-Shiller report on May 31. The decline means the sector has double-dipped back into negative territory, as the index fell below its previous post-housing-bubble low set in April 2009.
Shiller has said that U.S. housing prices could decline another 10 to 25 percent over the next five years. “There’s no precedent for this statistically, so no way to predict,” Shiller said recently, according to Bloomberg.
With so many houses in foreclosure, prices will stay depressed, especially with unemployment at 9.1 percent and tighter lending restrictions being the norm at many financial institutions.
Other experts agree that high unemployment rates and a tough economy mean housing prices are still well on their way on a downward slope.
In a recent Bloomberg report Paul Dales, a senior U.S. economist stated “With the foreclosure pipeline still full to bursting, it’s hard to see this downward pressure on prices abating.”
While many believe the housing market may see a pickup in prices this summer, Shiller is concerned about the long-term path the sector is taking. Among many of the items impacting markets are issues that many may seem remote… yet their impact looms large on the recovery.
For example the economic crisis faced in Greece, a country the same size of the state of Alabama in terms of area with a population and in terms of population smaller than that of Metro Los Angeles area (compared to other nations Greece is number 73 based on population), has the potential of disastrous impact on the entire world economy… first to the European Union but then spreading to other nations including the U.S and China.
Here in the U.S. (much as happened with Japan’s failed efforts to ease their economic crisis of the 90’s), in our efforts to avoid/lessen the pain of the economic crisis…the Federal Reserve has pumped hundreds of billions into the economy in order to spur more robust economic growth, while interest rates stand near zero. However, all the loose monetary policy in the world won’t help if consumer demand just isn’t there.
“When the demand isn’t there, you can lower interest rates all the way to zero and people are still not willing to spend — that’s where we are right now,” Shiller says.
Closer to home, we must be concerned about the actions of individuals electing to do Strategic Walk-Away’s (those allowing their homes to go into foreclosure when in fact they are able to make their mortgage payments) as a means of protecting themselves from the reality of negativity equity caused by the current economic down-turn while individually contributing to a deepening of the housing crisis.
Truly “no man is an island”. Understand this or better yet remember it often, as you go about your daily business. Act in a way that honors the impact we have on the world around us, with a sense of fairness, justice and compassion, with an attitude and actions that leave a trail of integrity and happiness in your wake with ripples of joy as you pass through the lives of others. Be aware that we may be like ships passing as in the night, but even so, we all are sailing upon the same sea, each one of us, perhaps unknowingly, affecting the journey of the other. Or as my wife loves to say: Do right, karma is real… What goes around comes around.
May the market be with you.
