Exclusive View: Peak Pessimism

Pessimism abounds in the media, whether it is directed towards the housing market or the economy in general. The very latest Quinnipiac poll (6/9/11) shows 78% think we’re in a recession.  I do believe that our media and our politicians have the ability to bring us down and keep us down with extended negative vibes. Well the heck with all that, today I’m highlighting a few long-term positives!

We might have an employment and a confidence problem, but someone should tell the poll respondents that they technically got question #18 wrong, because we’re not in a recession. The definition of a recession doesn’t rely on employment figures or how people feel about anything. But to be fair, these respondents weren’t given this direction and instead they expressed their personal (and political) feelings. But this poll question result, isolated on its own and broadcast by the media, really doesn’t help us going forward, does it? Back to the official definition of recession vs. expansion, it is based on cold hard Gross Domestic Product (GDP) data. And the fact is our last recession officially ended in the second quarter of 2009, and since then the U.S. economy has been expanding (this quarter will indeed mark eight consecutive quarters of GDP growth). U.S. aggregate GDP and per-capita GDP have never been higher in our history than their level right here right now. And we have great potential to expand further. People should be reminded of that every once in a while.  

I like the January 2011 analysis by Inman News, showing it is becoming cheaper to buy than to rent, a phenomenon that certainly cannot persist forever. http://www.inman.com/news/2011/01/24/cheaper-buy-rent-in-72-largest-us-cities

I also like the March 2011 article in Fortune Magazine, which concludes “Two basic factors are laying the foundation for dramatic recovery in residential real estate. The first is the historic drop in new construction. The second is a steep decline in prices, on the order of 30% nationwide since 2006, and as much as 55% in the hardest-hit markets. The story of this downturn has been an astonishing flight from the traditional American approach of buying new houses to an embrace of renting. But the new affordability will gradually lure Americans back to buying homes. And the return of the homeowner will start raising prices in many markets this year.” http://finance.fortune.cnn.com/2011/03/28/real-estate-its-time-to-buy-again/

Please skim through this refreshing Real Estate article just released by CNN (6/11/2011), “The return of optimism for U.S. housing”, I’ll bet no one saw this one http://www.cnbc.com/id/43334679 

Sure, we have plenty of challenges and the recovery should be stronger and jobs more plentiful. But I’ll officially stand as “patiently optimistic”. Locally, I happen to think that housing desire here (which turns into demand) has been and will continue to be strong. Potential North Shore buyers either want to live here or are already here and want to move up, but the problem is that their ability and confidence to act on that desire has definitely been constrained. But I think over time these constraints will diminish, as the economic expansion affects North Shore buyers more favorably than most others. Over time, more and more buyers will find a way, as they always have, and they’ll turn desire into demand. I hope that I'm right.