So … the residential real estate market has officially tanked.
Home buyers are discouraged and prices have been falling steadily for the last twelve months, after slight gains at the end of 2009. They are now lower than they were in March 2009, when real estate forecasters pegged what they believed to be the bottom of the market after the housing bubble burst in 2008.
Why all the discouragement? Maybe it has something to do with this – Consumer Confidence Falls Unexpectedly in May:
“Consumers are considerably more apprehensive about future business and
labor market conditions as well as their income prospects,” said Lynn
Franco, director of The Conference Board Consumer Research Center. She
said fears over inflation, which eased in April, picked up again in May.
“Unexpectedly”? Really? Not if you saw these headlines this weekend:
The Memorial Day Barbecue Will Cost You 29% more this year thanks to inflation
Gas tanks are draining family budgets
According to the AP, the average American family is spending $168 a month more on gasoline than they were a year ago.
Almost as frustrating as the overuse of the word “unexpectedly” are phrases like this, “The squeeze is happening at a time when most people aren’t getting raises, even as the economy recovers.” Really? The economy is recovering? Based on what metrics?
Employers are simply not hiring. Small to medium sized businesses (which generally lack both the money and the political clout to acquire ‘most favored’ status in Washington, DC) are not hiring, because uncertainties stemming from the Obama Administration’s massive onslaught of new (and proposed) health care, financial, and environmental regulations mean that the costs of expansion are unknown.
The only nationwide business to announce a major hiring incentive during the last 12 months was McDonald’s Corporation, which incidentally was one of the first corporations to receive a special waiver from the new requirements of the ObamaCare law.
The only positive news with regard to employment is that layoffs have been decreasing. But how long will this trend last? Unemployment is still dangerously high, and the number of long-term unemployed (40% – 45%) is staggering. Worse still, the risks and uncertainties inherent in our current economic and regulatory quagmire have pushed many companies into excluding outright any job applicants who are currently unemployed. This is not only the worst unemployment situation since WWII, it is also the most hopeless-looking in my lifetime.
Doug Mataconis wrote a piece in response to the news about the ‘official’ double dip in housing prices, which he concludes thusly:
One of the biggest problems with the housing bubble was that housing
went from being a long-term investment where people stayed for a long
time, [and] turned into a short-term get-rich-quick scheme … I suspect we’ll see a different kind of housing market than the one we
experienced in the 90s and 00s. Instead of flipping homes every few
years, people are more likely to hold on to a house for a longer period
of time. Instead of viewing their homes as a source of income and
refinancing at the drop of a hat, we may even see a return to the days
when people actually paid off their mortgages.
I think such a shift would be a good thing, because it would help average Americans focus once again on what they actually have (in terms of savings and equity) rather than on abstract projections about what something might be worth 5 or 10 or 20 years in the future. My parents paid their mortgage off in only 15 years, never owned a credit card, and paid for everything except utility bills and insurance premiums with cash. I wish more of us had that kind of financial discipline today.
But that won’t happen as long as Americans feel like they are broke. And the only way for consumer confidence to steadily, permanently rise, is for Americans to go back to work, full time, with sufficient pay and competitive benefits.
I believe that high unemployment, which stems from the uncertainty that is currently undermining the confidence of small to mid-sized businesses, should be the number one issue for Republicans in the 2012 elections. I believe this for two reasons. First, Americans would be in a much better position to cope with the losses incurred during the recession if they felt certain that income levels were on the way up, and they would soon be able to live comfortably again with enough left over to replenish savings and enjoy a few luxuries. That isn’t going to happen as long as businesses aren’t hiring.
Second, today’s unacceptably high unemployment rates are directly attributable to Obama Administration policies. His “stimulus” was an abject failure. His health care and financial reform bills have already added dozens of new regulations to businesses, with perhaps hundreds more still in the works. His executive orders, combined with EPA regulatory changes, have squeezed energy producers, forcing them to send jobs and capital overseas. And the cronyism between Obama and the mega banks, labor unions, and “chosen few” industries (green energy, automobiles) has been greater than anything seen since the demise of Tammany Hall.
The double dip in residential real estate prices and the resulting stagnation of the real estate market is simply a reflection of the true state of our economy, which is currently weak enough to over-ride the historically strong enticement of bargain-basement prices. We can only pray that this double dip does not greatly spill over into other sectors, because our current Administration doesn’t seem to have either the will or the skills necessary to do anything about it.